NAV and Dividend
Schroder Real Estate Investment Trust Limited
(the 'Company' / 'Group')
NAV AND DIVIDEND
Net Asset Value
Schroder Real Estate Investment Trust Limited announces an unaudited net asset
value ('NAV') of £290.7 million or 56.1 pence per share ('pps') as at
31 December 2014. This reflects an increase of 1.8% per share compared with the
NAV as at 30 September 2014, or a NAV total return, including the dividend of
0.62 pps, of 3%.The NAV total return over the 12 months to 31 December 2014 was
24.5%. A breakdown of the NAV movement over the quarter is set out below:
£m pps Comments
NAV as at 30 September 260.0 55.1 Announced 5 November 2014.
2014
Net placing proceeds 26.5 0.1 Placing proceeds of £27 million less
costs.
Adjusted NAV post placing 286.5 55.2 Based on 518,513,409 shares.
Unrealised change in 5.9 1.1 Like-for-like uplift increase of 2.2%
valuation of direct before capital expenditure and the
property portfolio impact of transactions over the
quarter.
Capital expenditure and (1.1) (0.2) Acquisition costs relating to the
acquisition costs Matalan in Bletchley and Heathfield
Industrial Estate in Milton Keynes.
Unrealised loss on joint (0.3) (0.1) Increase in the NAV of City Tower of £
ventures (City Tower in 1.4 million (included in the
Manchester and University like-for-likemovement of 2.2% above)
of Law in London) off-set by £1.7 million of acquisition
costs relating to the University of Law
Campus in Bloomsbury.
Realised loss on (0.9) (0.2) Loss on disposal arises due to part of
disposals the Stoke disposal proceeds (see
transactions section below) being
treated as an exceptional income item.
Post-tax net revenue 3.7 0.7 Reflects quarterly dividend cover of
101% excluding exceptional items
(principally relating to the Stoke
surrender premium) and non-recurring
items.
Dividends paid (2.9) (0.6) Reflects an annualised dividend of 2.48
pps.
Others (0.2) (-) Adjustment for lease incentives.
NAV as at 31 December 290.7 56.1
2014
Strategy
On 20 November 2014 the Company announced the issue of 47 million Ordinary
Shares under its Placing Programme at a price of 57.5 pps, raising gross
proceeds of £27 million. These proceeds have been invested in the University of
Law Campus in London, described under Acquisitions below.
During 2014 the Company raised total equity of £84.4 million from the issue of
162.6 million shares and deployed these proceeds, together with proceeds from
lower yielding disposals, into nine acquisitions totalling £120 million at an
average yield of 6.6%. These acquisitions satisfy the Company's investment
policy by offering an above average yield, good fundamentals and greater scope
for higher rental growth and value enhancing asset management. Successful
implementation of the growth strategy is delivering the expected benefits to
shareholders in terms of NAV growth, increased dividend cover, reduced leverage
and improved economies of scale.
The Placing Programme, established through the Company's prospectus dated 20
March 2014, and approved by shareholders in April 2014, enables the Company to
issue up to a further 71 million new shares over the period to 19 March 2015
with such shares being issued at a premium to the prevailing NAV in order to
cover the costs associated with the issue.
The momentum in the UK property market is expected to continue in 2015 which
should, in turn, lead to attractive returns for our shareholders. Whilst this
should lead to opportunities to enhance shareholder returns through further
growth, the potential for capital market volatility and political uncertainty
during 2015 will require a continued disciplined approachto new investment.
Against this backdrop, and the shift from an investor-led cycle to an
occupier-led cycle, we will continue totarget stronger towns and cities that we
expect to benefit disproportionally from higher GDP and jobs growth that should
in turn lead to higher rental growth and total returns.
These factors combined mean that whilst the Company is actively seeking
potential acquisitions to be funded from existing cash, the remaining capacity
to issue new shares may not be issued prior to 19 March.
Dividend payment
The Company announces an interim dividend of 0.62 pps for the period 1 October
2014 to 31 December 2014. Following the issuance of 47 million shares on 20
November 2014 the quarterly dividend payment increases from £2.9 million to £
3.2 million. The dividend payment will be made on 27 February 2015 to
shareholders on the register as at 6 February 2015. The ex-dividend date will
be 5 February 2015.
Over the quarter to 31December 2014 dividend cover was101% excluding
exceptional items and non-recurring expenses.
Market overview
The latest Investment Property Databank (`IPD') Monthly Index confirmed an
average total return for the three months to 31 December 2014 of4.4%, comprising
an income return of 1.5% and capital growth of 2.9%. The retail sector produced
the weakest total return of 2.8% with the industrial and office sectors
producing total returns of 6% and 5.6% respectively.
Performance versus IPD Index
The latest available data for the quarter to 30 September 2014 showed that the
Company's property portfolio produced a total return of 7.4% compared with4.4%
for the IPD peer group Quarterly Version of Balanced Monthly Index Funds (the
`IPD Index') on a like-for-like basis.This resulted in a total return for the
12 months to 30 September 2014 of 21.8% compared with the IPD Index of 17.9%.
Property Portfolio
As at 31 December 2014 the Company's direct property portfolio comprised
55properties independently valued at £396.45 million. At the same date, the
portfolio produced a rent of £25 million per annum which, based on the
independent valuation, reflected a net initial yield of 6%. The portfolio's
rental value is £29 million per annum, resulting in a reversionary yield of
6.9%. The portfolio benefits from additional fixed rental uplifts of £1.2
million per annum due by December 2016.
Theportfolio void ratewas unchanged over the quarter at 10.8%, calculated as a
percentage of the portfolio rental value. The average unexpired lease term,
assuming all tenants vacate at the earliest opportunity, increased over the
quarter from 7.25 to 7.5years. The tables below summarise the key portfolio
information as at 31 December 2014:
Sector weightings Weighting %
SREIT IPD Index*
Retail 29.5 40.4
Offices 42.8 30.7
Industrial 23.0 19.4
Other 4.7 9.5
* Latest available IPD Index data as at 30 September2014
Regional weightings Weighting %
SREIT IPD Index*
Central London 8.6 15.8
South East excl. Central London 35.1 43.2
Rest of South 10.1 6.7
Midlands and Wales 22.3 19.1
North and Scotland 23.9 15.2
* Latest available IPD Index data as at 30 September2014
Top ten properties Value (£) (%)
1 Manchester, City Tower 36,675,000 9.3
2 London, University of Law 34,000,000 8.6
Campus
3 Brighton, Victory House 29,250,000 7.4
4 Leeds, Headingley, The Arndale 18,300,000 4.6
Centre
5 Brentford, Reynards Business 18,000,000 4.5
Park
6 Uxbridge, 106 Oxford Road 18,000,000 4.5
7 Salisbury, Churchill Way West 15,400,000 3.9
8 Milton Keynes, Stacey Bushes 14,900,000 3.8
9 Norwich, Union Park 12,250,000 3.1
10 Basingstoke, Wickes unit 11,900,000 3.0
Total as at 31 December 2014 208,675,000 52.7
Top ten tenants Rent p.a. (£) % of portfolio
1 University of Law Limited 1,582,743 6.3
2 Wickes Building Supplies 1,092,250 4.4
Limited
3 Aviva Life and Pensions Ltd 1,039,191 4.2
4 The Buckinghamshire New 1,018,267 4.1
University
5 BUPA Insurance Services Limited 960,755 3.8
6 Mott MacDonald Limited 790,000 3.2
7 Recticel Limited (Guarantor 731,038 2.9
Recticel SA)
8 Lloyds TSB Bank PLC 710,000* 2.8
9 Matalan Retail Limited 675,800 2.7
10 Sportsdirect.com Retail Limited 657,177 2.6
Total as at 31 December 2014 9,257,221 37.0
*Lloyds rent reflects the income post expiry of rent free in Liverpool
During the quarter and since the quarter end the Company completed £49 million
of acquisitions and £25.6 million of disposals which are summarised below:
Acquisitions
The University of Law Campus in Bloomsbury, London WC1
On 19 December 2014 a 50% interest in The University of Law Campus in Bloomsbury,
London WC1 was purchased for £34 million. The property was acquired alongside
another Schroder Real Estate fund for a total price of £68 million, reflecting a
net initial yield of 4%. The property is let to The University of Law on a 12
year lease without tenantbreaks ata rent of £1.43 million per annum (50% share)
or £33.43 per sq ft.The lease benefits from five yearly, upward only rent
reviews to the higher of (i) the movement in the Retail Price Index (`RPI')
subject to a minimum uplift of 1% per annum and a maximum uplift of 4% per
annum; or (ii) the open market rental value without a maximum uplift.
The freehold property comprises two parcels of land totalling 0.8 acres on
which there are four buildings totalling 85,814 sq ft with a mix of office and
D1 (educational) planning use. The property is located one block from Bedford
Square and approximately 400 metres north of Tottenham Court Road station that
is benefiting from infrastructural improvements, including the creation a major
Central London Crossrail station. The current low site density and mix of uses
in the surrounding area creates the potential for higher long-term alternative
use value.
Matalan, Bletchley, Milton Keynes
On 18 November a retail warehouse in Bletchley, Milton Keynes was acquired for
£9.9 million, reflecting a net initial yield of 6.5%. The property is let to
Matalan Limited for a further 6.5 years at a rent of £675,800 per annum,
equating to £13.14 per sq ft. The freehold property comprises a 51,488 sq ft,
retail warehouse in a prominent position on the south side of Milton Keynes
adjacent to the junction of Watling Street and the A5 dual carriageway. The
property adjoins a Tesco superstore and is a short distance from complementary
retail warehouse occupiers including IKEA and retail parks such as Beacon
Retail Park, where rents are in the region of £20 per sq ft. The property has a
flexible planning consent permitting all retail uses except for food and has a
site density of 35% with potential for future intensification of use.
Heathfield Industrial Estate, Milton Keynes
On 25 November Heathfield Industrial Estate in Milton Keynes was acquired for £
5.06 million, reflecting a net initial yield of 7.7% and a reversionary yield,
assuming all units are let at current market rents, of approximately 9%. The 28
unit industrial estate totalling 104,200 sq ft immediately adjoins the 213,536
sq ft Stacey Bushes Industrial Estate in Milton Keynes that was acquired in
August 2014.
Disposals
Wembley, Olympic Office Centre
As expected, on 19 December the disposal of The Olympic Office Centre completed
for £15.4 million, in line with the independent valuation as at 30 September
2014.
Brentford, Reynards Trading Estate
On 23 December 2014 planning permission was issued for a 195 unit residential
scheme at Reynards Trading Estate in Brentford. The disposal to Notting Hill
Home Ownership is therefore unconditional and due to complete on 11 February
2015 at a price of £20.18 million. The price compares with the independent
valuation as at 31 December 2014 of £18 million.
Stoke-on-Trent, Remploy Building
On 22 November the Remploy Building in Stoke was sold for a total consideration
of £3.5 million, reflecting a net initial yield of 8% and in line with the
independent valuation as at 30 September 2014. The warehouse property was let
to Remploy,who were not in occupation, for a further seven years. The Company
proactively undertook a joint sale exercise with Remploy and completed a
disposal to an owner occupier at £2.31 million, with Remploy simultaneously
paying a surrender premium of £1.19 million.
Harrow, St. Ann's Road
On 22 December a retail unit in Harrow was sold for £2.14 million, reflecting a
net initial yield of 5.75%, which was 7% above the independent valuation as at
30 September 2014. The property was let to Caversham Finance Limited, trading
as Brighthouse, for a further 7.5 years.
Debt
The Company has a single loan in place with Canada Life totalling £129.6
million. As at 31December 2014 the loan was secured against property with a
combined value of £293.6 million. The loan has a weighted duration of 12.25
years with a fixed interest rate of 4.77%. Details of the loan and compliance
with the principal covenants are set out below:
Canada Maturity Interest Loan to LTV Interest ICR Forward Forward
Life rate (%) Value ratio cover ratio looking looking
loan (`LTV') covenant ratio covenant ICR ICR ratio
ratio* (%)* (%)** (%)** ratio covenant
(%) (%)*** (%)***
103.7 16/04/ 4.77 44.1 65 299 185 260 185
2028
25.9 16/04/
2023
* Loan balance divided by property value as at 31 December 2014
** For the quarter preceding the Interest Payment Date (`IPD'), ((rental income
received - void rates, void service charge and void insurance) / interest paid)
*** For the quarter following the IPD, ((rental income received - void rates,
void service charge and void insurance) / interest paid)
In addition to the property portfolio secured against the Canada Life facility,
the Company has unsecured properties with a value of £102.9 million and cash as
at 31 December 2014 of approximately £28 million. This results in a loan to value
ratio, net of cash, of 25.6%.
-ENDS-
For further information:
Schroder Real Estate Investment Management Limited 020 7658 6000
Duncan Owen / Nick Montgomery
Northern Trust: 01481 745529
David Sauvarin
FTI Consulting: 020 3727 1000
Dido Laurimore / Ellie Sweeney
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