New lease, refurbishment and forward sale
1 October 2020
SCHRODER EUROPEAN REIT AGREES NEW LEASE, REFURBISHMENT AND FORWARD SALE OF A PARIS OFFICE ASSET FOR c. €104 MILLION
Schroder European Real Estate Investment Trust plc ("SERE" or the "Company"), the company investing in European growth cities, has exchanged contracts to sell its Boulogne-Billancourt office asset in Paris for approximately €104 million, subject to programme and cost. This significant transaction will:
· Deliver a profit, post all acquisition and development costs, of approximately €28 million, representing a net profit of c. 35%, subject to programme and cost;
· Significantly strengthen the balance sheet and Net Asset Value ("NAV") of the Company;
· Provide additional funds for reinvestment and earnings enhancing initiatives.
The sale is structured as a forward funding, with the building being handed over to the purchaser in H1 2022, following completion of a comprehensive refurbishment which is being undertaken by the Company. The refurbishment and sale follows the agreement of a new 10-year pre-let contract with existing tenant Alten in June this year. The rental uplift is 39% higher than the previous rent paid.
The final sale price of approximately €104 million will deliver net sale proceeds of approximately €70 million when completed, after deducting the c. €30 million cost of refurbishing and re-letting the building. This represents a profit on cost of c. 35%. The sale proceeds will be received in stages and the Company expects the NAV to increase incrementally as sale receipts occur. 50% of the price is to be received on exchange of the definitive deed prior to this calendar year end 2020, with the remainder payable in installments over the subsequent 18 months as construction is completed. The overall increase to the most recent published NAV as at 30 June 2020 is expected to be approximately 15%, subject to programme and cost.
The building was originally acquired in 2016 for €37.5 million with the Company identifying an opportunity to create significant value by undertaking a major repositioning of the asset whilst taking advantage of the rapidly improving market dynamics in the Boulogne-Billancourt sub-market of Paris. The transaction reflects the Company's ability to add value through active management of investments acquired in winning high growth locations.
The net sale proceeds strengthen the Company's balance sheet, providing significant operational and financial flexibility. The funds will primarily be redeployed into new earnings enhancing initiatives including new investments.
Sir Julian Berney Bt., Chairman of the Board commented: "This is a transformational transaction, which will be highly accretive to shareholder returns. It is a strong endorsement of the Company's strategy, to identify real estate where we can create significant value for shareholders through asset management, benefiting from our team's local expertise inside the key markets.
"Our focus continues to be on driving the performance of the existing portfolio. This will provide a clear path to income growth and improving long-term shareholder returns and the Company's rating."
Enquiries:
Jeff O'Dwyer / Duncan Owen
Schroder Real Estate Investment Management Limited Tel: 020 7658 6000
Ria Vavakis
Schroder Investment Management Limited Tel: 020 7658 2371
Dido Laurimore/Richard Gotla/Methuselah Tanyanyiwa
FTI Consulting Tel: 020 3727 1000
This announcement contains inside information.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
Latest directors dealings
- 8 hours ago Johnson Matthey
- 9 hours ago Galliford Try
- 9 hours ago Galliford Try
- 9 hours ago Centrica
- 10 hours ago Smith & Nephew