New lettings and increase to debt facility
30 October 2019
NEW LETTINGS SECURED ALONGSIDE INCREASE TO DEBT FACILITY AT PARIS OFFICE ASSET
Schroder European Real Estate Investment Trust Plc ("SERE" or the "Company"), the company investing in European growth cities, announces it has completed three new lease agreements at its Saint-Cloud office investment in Paris. It has also increased the debt facility secured against the asset by €4 million, taking the total loan to €17 million, with the proceeds being used to fund the ongoing portfolio-wide capital expenditure programme.
Asset management
Totaling c. 3,720 sqm of space, the new lease agreements will generate €0.8 million of annual rental income. Details of the individual transactions are as follows:
· A lease extension and floorspace expansion with existing occupier Outscale, the cloud operating system company, taking its occupancy from c. 1,695 sqm to c. 2,600 sqm. The six year fixed term lease commences in April 2020, at a rent of €0.6 million p.a., reflecting an uplift of €0.25 million on the previous agreement;
· A new three year lease with Ascott Informatique, an IT company, for 850 sqm, commencing September 2019, at a rent of €0.17 million p.a.; and
· A new 12 year lease with a government body for c. 270 sqm of storage accommodation, at a rent of €22,000 p.a.
Acquired in February 2017 for approximately €30 million, the 15,800 sqm office building, in Ile de France, Western Paris, is around 90% let to 11 tenants and is valued at €37.9 million (as at 30 September 2019).
Increased debt facility
The Company has also completed a €4 million increase to its existing debt facility secured against the asset, with Banque Populaire, taking the total loan to €17 million.
The loan represents an LTV of 45% against the value of the property. The loan matures in December 2024 and has a margin of 1.33% above the 3 month Euribor rate. With Euribor currently negative, it is applied at zero, resulting in a current total all-in interest cost of 1.33% p.a. The Company has acquired an interest rate cap to limit the maximum future potential interest cost if Euribor were to increase, to an all-in rate of 2.6% p.a.
The loan proceeds will be used to fund capital expenditure across the portfolio. This will include preliminary works at the Company's other Paris office investment, Boulogne-Billancourt, where a conditional agreement for a long term lease has now been signed with the existing tenant Alten, effective on completion of a comprehensive refurbishment of the building. The Company is progressing with planning and detailed design work for this refurbishment, with an expectation of starting the full works program in H1 2020. Once complete, the project will enhance the building quality and income profile of the portfolio and has the potential to deliver attractive development profits.
Following the loan increase, the Company has total outstanding debt of €77 million across six facilities, representing an LTV of just under 30% against the overall gross asset value of the Company. The current blended all-in interest rate is 1.4%, substantially below the portfolio net initial yield against current valuation of c. 6.2%. The Company expects to take further gearing to fund the Paris Boulogne-Billancourt refurbishment project, which would take overall gearing to circa 35% LTV.
Jeff O'Dwyer, of Schroder Real Estate Investment Management Limited, commented: "We continue to make good progress with our asset management programme, demonstrating the ongoing demand from a diverse range of occupiers for space in our properties. The transformational redevelopment of Boulogne-Billancourt remains on track and we look forward to providing the market with further updates in due course."
Enquiries:
Duncan Owen/Jeff O'Dwyer
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 Tel: 020 3727 1000
FTI Consulting
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