NAV and Dividend

RNS Number : 6114L

Schroder Real Estate Inv Trst Ld

29 April 2015

 



29 April 2015

Schroder Real Estate Investment Trust Limited

(the 'Company' / 'Group')

ANNOUNCEMENT OF NAV AND DIVIDEND FOR PERIOD TO 31 MARCH 2015

The Schroder Real Estate Investment Trust Limited today announced its unaudited net asset value and dividend for the three months to 31 March 2015.

Net Asset Value

The Company delivered an unaudited net asset value ('NAV') of £299.2 million or 57.7 pence per share ('pps') as at 31 March 2015.  This reflects an increase of 2.9% per share compared with the NAV as at 31 December 2014, or a NAV total return, including the dividend of 0.62 pps, of 4%.  The NAV total return over the 12 months to 31 March 2015 was 24.4%.  A breakdown of the NAV movement over the quarter is set out below:

	£m	pps	Comments
NAV as at 31 December  2014	290.7	56.1	Announced 28 January 2015.
Unrealised change in valuation of direct property portfolio	5.4	1.0	Like-for-like uplift increase of 1.7% before capital expenditure and the impact of disposals completed and unconditionally exchanged during the quarter.
Capital expenditure	(0.3)	(0.1)	Refurbishment works at Cheltenham, Liverpool and Milton Keynes.
Unrealised gain on joint ventures (City Tower in Manchester and University of Law in London)	1.2	0.2	Increase in the NAV of City Tower of £1.2 million (included in the like-for-like movement of 1.7% above).
Realised gain on disposals	3.1	0.6	See disposal section below.
Pre-tax net revenue	2.7	0.6	Reflects pre-tax dividend cover of 84%.
Tax	(0.3)	(0.1)	Tax relates to balancing payments for the year to March 2014 and accrued tax for the year to March 2015.
Dividends paid	(3.2)	(0.6)	Reflects an annualised dividend of £12.8 million or 2.48 pps.
Others	(0.1)	-	Adjustment for lease incentives.
NAV as at 31 March 2015	299.2	57.7

REIT conversion

At the Extraordinary General Meeting held on 28 April 2015, shareholders voted in favour of the special resolution to convert to Real Estate Investment Trust ('REIT') status.  The Company should therefore enter the UK REIT regime on or around 1 May 2015.  The Board recommended conversion to REIT status in order to reduce the overall burden of UK taxation and increase the net income and overall profitability of the Company.  Full details of the REIT conversion proposal are contained in the Circular available on the Company's website www.sreit.co.uk.

Strategy

Following the issuance of 47 million new shares in November 2014 and the subsequent acquisition of Store Street in Bloomsbury, Central London, the Company had the ability under the Placing Programme to issue up to a further 71 million new shares over the period to 19 March 2015.  In order to preserve the ability to efficiently raise additional equity, on 4 March, 47.2 million shares were issued under the Placing Programme to be held in treasury.

There is an acquisition currently under negotiation that, if successful, would deploy most of the cash currently available for investment.   The Company currently has no immediate plans to issue further new shares.  If new equity is however issued, whilst not ruling out opportunistic acquisitions, it is most likely that this equity would fund asset management initiatives within the existing portfolio.  New issuance would therefore continue to only be undertaken in a disciplined manner when projects have been identified to deploy capital. 

Dividend payment

The Company announces an interim dividend of 0.62 pps for the period 1 January 2015 to 31 March 2015.  The dividend payment will be made on 28 May 2015 to shareholders on the register as at 8 May 2015.  The ex-dividend date will be 7 May 2015.

Following shareholder approval to the REIT conversion proposal the Company expects to enter the UK REIT regime on or around 1 May.  The aforementioned dividend for the period from 1 January 2015 to 31 March 2015 will be paid in the normal way and will be paid free of any withholding tax.

Market overview

The latest Investment Property Databank ('IPD') Monthly Index confirmed an average total return for the three months to 31 March 2015 of 3.0%, comprising an income return of 1.4% and capital growth of 1.6%.  The retail sector produced the weakest total return of 1.9% with the office and industrial sectors producing total returns of 4% and 3.6% respectively. 

Performance versus IPD Index

The latest available data for the quarter to 31 December 2014 showed that the Company's property portfolio produced a total return of 3% compared with 4.3% for the IPD peer group Quarterly Version of Balanced Monthly Index Funds (the 'IPD Index') on a like-for-like basis. However, this resulted in a total return for the 12 months to 31 December 2014 of 19.7% compared with the IPD Index of 17.9%.

Property Portfolio

As at 31 March 2015, adjusted for the disposal of Spectrum House in Woking which took place following the quarter end, the Company's direct property portfolio comprised 53 properties independently valued at £379.84 million.  At the same date, the portfolio produced a rent of £25.4 million per annum which, based on the independent valuation, reflected a net initial yield of 6.3%.  The portfolio's rental value is £29.2 million per annum, resulting in a reversionary yield of 7.3%.  The portfolio benefits from additional fixed rental uplifts of £2.1 million per annum due by March 2017.

As a result of letting activity over the quarter the portfolio void rate fell from 10.8% as at 31 December to 9.6% as at 31 March 2015, calculated as a percentage of the portfolio rental value.  The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, was unchanged over the quarter at 7.5 years.  The tables below summarise the key portfolio information as at 31 March 2015, adjusted for the disposal of Woking since the quarter end:

Sector weightings	Weighting %
	SREIT	IPD Index*
Retail	36.2	40.4
Offices	42.1	30.7
Industrial	17.0	19.4
Other	4.7	9.5

* Latest available IPD Index data as at 31 December 2014 

Regional weightings	Weighting %
	SREIT	IPD Index*
Central London	9.0	15.8
South East excl. Central London	32.9	43.2
Rest of South	11.1	6.7
Midlands and Wales	21.8	19.1
North and Scotland	25.2	15.2

* Latest available IPD Index data as at 31 December 2014

Top ten properties		Value (£)	(%)
1	Manchester, City Tower	37,937,500	9.9
2	London, Bloomsbury, Store Street	34,000,000	8.9
3	Brighton, Victory House	29,500,000	7.7
4	Leeds, Headingley, The Arndale Centre	19,000,000	5.0
5	Uxbridge, 106 Oxford Road	18,350,000	4.8
6	Salisbury, Churchill Way West	15,850,000	4.2
7	Milton Keynes, Stacey Bushes	15,600,000	4.1
8	Norwich, Union Park	12,500,000	3.3
9	Basingstoke, Wickes unit	11,900,000	3.1
10	Luton, The Galaxy	11,700,000	3.1
	Total as at 31 March 2015	206,337,500	54.0

Top ten tenants		Rent p.a. (£)	% of portfolio
1	University of Law Limited	1,582,743	6.2
2	Wickes Building Supplies Limited	1,092,250	4.3
3	Aviva Life and Pensions Limited	1,039,191	4.1
4	The Buckinghamshire New University	1,018,267	4.0
5	BUPA Insurance Services Limited	960,755	3.8
6	Mott MacDonald Limited	790,000	3.1
7	Recticel Limited (Guarantor Recticel SA)	731,038	2.9
8	Matalan Retail Limited	675,800	2.7
9	Sportsdirect.com Retail Limited	659,277	2.6
10	Booker Limited	570,000	2.2
	Total as at 31 March 2015	9,199,321	35.9

During the quarter and since the quarter end the Company has completed or unconditionally exchanged on disposals totalling £31 million.  These are summarised below:

Disposals

Brentford, Reynards Trading Estate

The disposal to Notting Hill Home Ownership completed 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. 

Hinckley, Coventry Road site

The disposal to Redrow Homes Limited completed on 29 January 2015 at a price of £4.525 million.  The transaction is structured so that the Company has received an initial payment of £2.26 million with the balance to be received on 29 October 2015 without condition.

Woking, Spectrum House

On 20 March 2015, unconditional contracts were exchanged to sell Spectrum House in Woking for £2.305 million which compared with the independent valuation of £1.05 million as at 31 December 2014.  The disposal subsequently completed on 7 April.  Spectrum House is a substantially vacant, 10,023 sq ft office building where planning consent was recently secured for residential use.

New Malden, St. George's Court

On 2 April 2015, unconditional contracts were exchanged to sell St. George's Court in New Malden for £4 million which compared to the independent valuation of £2.9 million as at 31 December 2015.  Completion of the disposal is deferred by 12 months during which time the buyer, CNM Estates, has taken a lease of the vacant office space at £150,000 per annum.  As at 31 March 2015 the independent valuation of the property is £3.5 million.  St. George's Court comprises an 18,403 sq ft mixed use building with retail on the ground floor and, prior to this transaction, vacant upper parts. 

Debt

The Company has a single loan in place with Canada Life totalling £129.6 million.  As at 31 March 2015 the loan was secured against property with a combined value of £295.8 million.  The loan has a weighted duration of 12 years with a fixed interest rate of 4.77%.  Details of the loan and compliance with the principal covenants are set out below:

Canada Life loan	Maturity	Interest rate (%)	Loan to Value ('LTV') ratio* (%)	LTV ratio covenant (%)*	Interest cover ratio (%)**	ICR ratio covenant (%)**	Forward looking ICR ratio (%)***	Forward looking ICR ratio covenant (%)***
103.7	16/04/2028	4.77	43.8	65	303	185	284	185
25.9	16/04/2023

*              Loan balance divided by property value as at 31 March 2015

**             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 £86.3 million and cash as at 31 March 2015 of approximately £45.4 million.   This results in a loan to value ratio, net of cash, of 22%.   

-ENDS-

For further information:

Schroder Real Estate Investment Management Limited: Duncan Owen / Nick Montgomery	020 7658 6000
Northern Trust: David Sauvarin	01481 745529
FTI Consulting: Dido Laurimore / Ellie Sweeney	020 3727 1000

 

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