SCHRODER EUROPEAN REAL ESTATE INVESTMENT TRUST PLC - Announcement Of Nav And Dividend For Period To 30 June 2018

Release Date: 03/08/2018 08:00
Code(s): SCD
 
Wrap Text
Announcement Of Nav And Dividend For Period To 30 June 2018

Schroder European Real Estate Investment Trust PLC
(Incorporated in England and Wales)
Registration number: 09382477
JSE Share Code: SCD
LSE Ticker: SERE
ISIN number: GB00BY7R8K77


3 August 2018

                 ANNOUNCEMENT OF NAV AND DIVIDEND FOR PERIOD TO 30 JUNE 2018

Schroder European Real Estate Investment Trust plc (“SERE” or the “Company”), the company investing
in European growth cities, today announces its unaudited net asset value (“NAV”) for 30 June 2018,
together with its third interim dividend for the year ending 30 September 2018 relating to the three
months to 30 June 2018:
    • Unaudited NAV as at 30 June 2018 of €187.2 million or 140.0 cents per share, an uplift of 0.1%
        over the quarter;
    • Quarterly NAV total return, including the dividend, of 1.4%;
    • An interim dividend of 1.85 euro cents per share relating to the quarter to 30 June 2018;
    • This dividend is in-line with the target dividend stated at IPO of an annualised rate of 5.5% on
        the IPO issue price

Since quarter end the Company has made progress with its investment strategy, including realising
profit with sales at low yields and reinvestment at higher yields:
    • The sale of its investment in two Casino supermarkets in France (as announced on 1 February
          2018) for a price of approximately €45 million and a net income yield of sub 5%;
    • Contracted acquisition of a logistics investment in Rumilly, France for a purchase price of €8.6
          million, representing a net income yield of 7.0%. This is targeted to complete in mid-August;
    • Exclusivity granted for the acquisition of three Dutch warehouse investments, totalling over
          €20 million at a net income yield of between 6% - 7%.

Net Asset Value

The table below provides a breakdown of the movement in NAV during the reporting period:

    NAV movement                                            €m(1)             Cps(2)                 %(3)

    Brought forward NAV as at 1 April 2018                  187.1             139.9

    Capital expenditure                                      (0.3)             (0.2)                (0.2)

    Unrealised gain in valuation of the property
                                                             0.7                0.5                  0.4
    portfolio

    EPRA earnings                                            2.4                1.9                  1.4

    Non-cash items                                           (0.2)             (0.2)                (0.1)


    Dividend paid                                            (2.5)             (1.9)                (1.4)


    NAV as at 30 Jun ‘18                                    187.2             140.0                  0.1


(1) Management reviews the performance of the Company principally on a proportionally consolidated basis. As a result, figures
    quoted in this table include the Company’s share of joint ventures on a line-by-line basis and excludes non-controlling
    interests in the Company’s subsidiaries.
(2) Based on 133,734,686 shares
(3) % change based on starting NAV 1 April 2018

Interim Dividend

The third interim dividend of 1.85 euro cents per share for the year ending 30 September 2018
represents an annualised rate of 5.5% based on the Euro IPO issue price of 137 euro cents per share.
Based on the GBP IPO issue price of 100 pence per share the annualised yield is 6.7% (based on FX rates
as at 30 June 2018). The dividend is 96% covered from income received during the quarter. Dividends
for the first nine months of the financial year are 120% covered from net income received.

The interim dividend payment will be made on Friday, 14 September 2018 to shareholders on the
register on the record date of Friday, 31 August 2018. In South Africa, the last day to trade will be
Tuesday, 28 August 2018 and the ex-dividend date will be Wednesday, 29 August 2018. In the UK, the
last day to trade will be Wednesday, 29 August 2018 and the ex-dividend date will be Thursday, 30
August 2018.

The interim dividend will be paid in GBP to shareholders on the UK register and Rand to shareholders
on the South African register. The exchange rate for determining the interim dividend paid in Rand will
be confirmed by way of an announcement on Monday, 13 August 2018. UK shareholders are able to
make an election to receive dividends in Euro rather than GBP should that be preferred. The form for
applying for such election can be obtained from the Company's UK registrars (Equiniti Limited) and any
such election must be received by the Company no later than Friday, 31 August 2018. The exchange
rate for determining the interim dividend paid in GBP will be confirmed following the election cut off
date by way of an announcement on Monday, 3 September 2018.

Shares cannot be moved between the South African register and the UK register between Monday, 13
August 2018 and Friday, 31 August 2018, both days inclusive. Shares may not be dematerialised or
rematerialised in South Africa between Wednesday, 29 August 2018 and Friday, 31 August 2018, both
days inclusive.

The Company has a total of 133,734,686 shares in issue on the date of this announcement. The
dividend will be distributed by the Company (UK tax registration number 21696 04839) and is regarded
as a foreign dividend for shareholders on the South African register. In respect of South African
shareholders, dividend tax will be withheld from the amount of the dividend noted above at the rate
of 20% unless the shareholder qualifies for the exemption. Further dividend tax information for South
African shareholders will be included in the exchange rate announcement to be made on Monday, 13
August 2018.

Property Portfolio

As at 30 June 2018, the Company owned ten properties located in growth cities of Continental Europe,
independently valued at €238.0 million. Over the quarter, the portfolio value has increased €0.4 million,
net of capex. This reflects a property capital return of 0.2%. Over the same period, the portfolio
generated a net property income of €3.9 million, representing an ungeared quarterly property income
return of 1.7% (on an annualised basis, reflecting an ungeared property income return of 6.7%).

The committed portfolio, which includes the Rumilly purchase and excludes the Casino sales, will
comprise nine properties with a value of approximately €202 million. The portfolio will generate
contracted rents of €14.6 million and is 97% let with an average unexpired lease term to first break and
expiry of 4.7 years and 6.5 years. The rent on all leases is indexed to inflation and individual asset
business plans are being implemented to improve future earnings and capital growth potential. An
example of this is the lease surrender and remarketing of the Company’s Hamburg asset, in a
strengthening office sub-market, where SERE is refurbishing part of the property and already has
interest from potential tenants.

The country and sector allocations for the committed portfolio are set out in the table below:
Country allocation (% Committed Portfolio   Sector allocation          Committed
contracted rent)        (inc Rumilly, exc   (% contracted rent)       Portfolio (inc
                             Casino)                                  Rumilly, exc
                                                                         Casino)

France                       44%            Office                        49%
Germany                      25%            Retail                        30%
Spain                        14%            Logistics                      5%
Netherlands                  16%            Mixed                         16%
Total                       100%            Total                         100%


The fundamentals of the Eurozone economy remain positive and growth continues. Unemployment is
falling, contributing to positive sentiment and increasing consumer spend. The strong economic
backdrop is benefiting property markets, with office vacancy rates in some of the Company’s existing
and target markets at record lows, resulting in strong rental growth. (Source: JLL Office Property Clock
Q2 2018)

Investment Progress

The Company has invested over €233 million since IPO, constructing a property portfolio with a
diversified income profile across key growth cities in Western Continental Europe. A total of €73.4
million of debt has been drawn, equating to an LTV of c.28% at an average weighted interest rate of
1.3% p.a. and an average weighted duration of approximately 6.1 years.

The sale of the Casino supermarkets provides new investment capacity of approximately €45 million
(including further gearing). Approximately €9 million will be deployed with the completion of the
Rumilly acquisition and the three Dutch warehouse investments in exclusivity total over €20 million.
These acquisitions would provide further sector and tenant diversification and are at income yields that
are accretive to the Company’s existing portfolio. If all these acquisitions complete the Company would
have approximately €15 million of remaining investment capacity and the Investment Manager is
reviewing and in negotiation on a number of new opportunities.

Jeff O’Dwyer, of Schroder REIM, said:

"The Rumilly logistics commitment adds further diversification to the portfolio which now offers a
mixture of income and growth through a programme of ongoing and identified asset management
initiatives.

“Approximately 90% of the portfolio is situated in Europe’s fastest growing conurbations and includes
cities such as Berlin, Frankfurt, Hamburg, Stuttgart and Paris, all of which are set to outperform their
domestic economies in the medium to long term. Building on the positive Half Year results, the
attractive income distribution and continued growth in property values across the portfolio is a
reflection of the team’s ability to identify, acquire and manage assets that deliver on the Company’s
stated objectives.

“We remain well positioned to generate long term shareholder value, benefiting from the favorable
Eurozone backdrop, as we explore the different options to grow the company over the medium-to-long
term.”


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                         Tel: 020 3727 1000
FTI Consulting

JSE Sponsor
PSG Capital

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