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SCHRODER EUROPEAN REAL ESTATE INVESTMENT TRUST PLC - Half Year Results for the Six Months ended 31 March 2019

Release Date: 18/06/2019 08:00
Code(s): SCD     PDF:  
Wrap Text
Half Year Results for the Six Months ended 31 March 2019

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
("SEREIT"/ the "Company" / "Group")


18 June 2019                                                                                                                      


HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2019    

SUCCESSFUL ASSET MANAGEMENT AND INVESTMENT IN LOGISTICS ASSETS POSITIONS COMPANY TO DELIVER                                       
FURTHER PORTFOLIO VALUATION AND INCOME UPLIFT                

Schroder European Real Estate Investment Trust plc, the company investing in European growth cities and regions, today            
announces its half year results for the six months ended 31 March 2019.   

Key Highlights                                                                                                                    
-   Agreed conditional heads of terms (post period end) for a new long-term lease and capex programme at the                      
    Boulogne-Billancourt office investment in Paris, providing future potential capital value and income upside                       
-   Increased portfolio weighting towards higher growth sectors, recycling EUR17.3 million of capital into two logistics            
    assets in France, reflecting an income yield of 5.9%                                                                              
-   Maintained delivery of attractive dividend yield of 5.5% against Net Asset Value ('NAV')                                      

Financial highlights                                                                                                              
-   Net Asset Value ('NAV') of EUR182.8 million or 136.7 cps (30 September: EUR182.1 million or 136.2 cps), an increase over          
    the period of 0.4%                                                                                                                
-   NAV total return of 1.7% (31 March 2018: 6.1%)                                                                                
-   Underlying EPRA earnings of EUR5.4 million (31 March 2018: EUR6.5 million)                                                        
-   Profit for the six months of EUR3.2 million (31 March 2018: EUR10.8 million, which included a number of one-off gains)         
-   Total dividends declared relating to the six months of 3.7 cps, in-line with target of 5.5% annualised yield against the      
    euro IPO issue price                                                                                                              
-   Dividend cover of 108% (31 March 2018: 100%)                                                                                  
-   Loan to value ('LTV') of 28% (30 September 2018: 26%) at a weighted average total interest rate of 1.4%                       

Operational highlights                                                                                                            
-   100% of the portfolio's 13 institutional grade properties located in the fastest growing cities and regions of 
    Continental Europe                                                                                                                            
-   Improved portfolio diversification, increasing exposure to higher growth logistics warehouse sector from 13% to 19%           
    (31 March 2018: 0%)                                                                                                               
-   Maintained high portfolio occupancy of almost 100%, with a 6.5 years average lease term to expiry                             
-   Ongoing execution of asset management initiatives across the portfolio:                                                       
   
    -   Agreed conditional heads of terms (post period end) for a new long-term lease and capex programme with                        
        current tenant Alten, for 6,800 sqm, at the Boulogne-Billancourt office investment in Paris                                       
    -   Completion of EUR0.8 million refurbishment program at the Metromar Shopping Centre in Seville to improve                        
        centre vibrancy and visitor appeal                                                                                               
    -   Completed two new leases with tenants in the education and IT sectors for over c. 40% of space in Hamburg, at                   
        rents above business strategy. Detailed discussions ongoing for a further two floors, representing an additional 
        c. 25% of space 

-   Current portfolio valued at EUR240 million* reflecting an uplift of approximately 7.8% on purchase price, with                  
    transaction costs now fully recovered through valuation uplifts since acquisition                                                 
-   Underlying property portfolio total return of 3.5% over six months (excluding the impact from transaction costs)              

Commenting, Sir Julian Berney, Chairman of the Board, said:                                                                       
"This has been an active six month period for the Company which has seen us make important progress, improving the                
long-term income profile of the Company and increasing our exposure to higher growth regions and sectors. The Company             
has an exciting asset management opportunity to invest into its Paris Boulogne-Billancourt office investment, potentially 
delivering growth in rental income and capital value and improving the quality and defensive characteristics of the portfolio. 
This is a good example of how our investment strategy of targeting assets with strong property fundamentals in European 
Winning Cities provides opportunities for growth."      
 
Jeff O'Dwyer, Fund Manager for Schroder Real Estate Investment Management Limited, added: 

"The recent French logistics acquisition is further evidence of our focus on assembling a diversified portfolio in winning 
cities and regions across continental Europe. The Company now has c. 20% of its assets in industrial warehousing, up from 
0% twelve months ago. The majority of European real estate markets are performing well, particularly in Berlin, Frankfurt, 
Hamburg, Stuttgart and Paris, those cities where the Company has the majority of its exposure. We continue to focus on 
delivering our asset management programme and the optimal financing structure for this, in order to strengthen the 
income and portfolio profile, and support our ambition to  grow the size of the Company."  
 
The Half Year Report is also being published in hard copy format and an electronic copy of that document will shortly be 
available to download from the Company's webpage www.schroders.co.uk/sereit.
 
The Company has submitted a pdf of the hard copy format of the Half Year Report to the National Storage Mechanism and 
it will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. 
 
A further announcement will be made shortly to confirm the full timetable of the second interim dividend. 
 
For further information: 
 
    Schroder Real Estate Investment Management                                   020 7658 6000 
    Duncan Owen / Jeff O'Dwyer 
    Ria Vavakis                                                                  01481 745212 
    Schroder Investment Management Limited 
    FTI Consulting                                                               020 3727 1000 
    Dido Laurimore / Richard Gotla / Methuselah Tanyanyiwa 
 
A presentation for analysts and investors will be held at 08.45 BST today at Schroders plc, 1 London Wall Place, London, EC2Y 5AU.  
If you would like to attend, please contact James Lowe at Schroders on james.lowe@schroders.com or +44 (0)20 7658 2083. 
 
A webcast presentation will take place at 1100 BST / 1200 SA, registration for which can be accessed via: 
 
https://www.brighttalk.com/webcast/1184/360254?utm_source=Schroder+Investments+Limited&utm_medium=brighttalk&utm_cam
paign=360254&utm_source=ExactTarget&utm_medium=Email&utm_campaign=SEREIT+Notice+of+Results-+20190528_114347 

* Includes the Group's 50% share of the Seville property proportionally valued at EUR26.4 million.
 
Chairman's Statement 

Overview 
SEREIT had an active six month period to 31 March 2019, with a continued focus on reinvesting sale proceeds, alongside a 
programme of value-enhancing asset management activity. As a result, the Group is in a strengthened position, with a 
further diversified portfolio, increased allocation to higher growth sectors and improved potential for longer-term income 
and capital growth.   

The  acquisition  of  the  Rennes  logistics  property  (comprising  two  neighbouring  warehouses)  in  March  completed  the 
reinvestment of the proceeds from the profitable sale of the Casino supermarkets last year. The overall reinvestment of 
these proceeds  has been at higher income yields and has increased exposure to the higher growth logistics and industrial 
sector. This forms part of the strategy to have a diversified income-generating portfolio focused on the Winning Cities and 
regions of Continental Europe, balanced across different growth sectors. 

The main asset management activity has been agreeing heads of terms (post-period end) with the tenant at the Boulogne-
Billancourt office investment in Paris for a new long-term lease commitment. As part of the agreement, SEREIT will plan to 
undertake a significant capital expenditure programme to refurbish the building and the heads of terms are subject to a 
number of conditions, including planning and financing. If concluded, it has the potential to deliver both NAV return upside 
and improve the longer-term income and portfolio profile. Progressing this project is a key focus for the remainder of the 
year, alongside other asset management initiatives such as securing further lease agreements for the remaining vacant 
space at the Group's Hamburg office and Metromar shopping centre in Seville. 

Results 
The Company's NAV at 31 March 2019, excluding non-controlling interests, was EUR182.8 million or 136.7 euro cents per 
share ("cps"), representing an increase of EUR0.7 million (0.5 cps / 0.4%) over the six month period. This movement includes 
property transactions costs of EUR1 million (0.7 cps) associated with the Rennes acquisition. Including dividends, the NAV 
total return over the period excluding these one-off items was 2.2% and was 1.7% including the one-off items. 
 
The profit for the six month period ending 31 March 2019 was EUR3.2 million and EPRA earnings were EUR5.4 million.    
 
The Board also notes that it is working with its advisers to assess the potential impact of proposed changes to various 
European tax laws. Further detail is provided in note 7 of the condensed consolidated interim financial statements.  
  
Strategy 
The Group has a focused investment strategy, investing in good quality real estate located in Winning Cities and regions 
across Continental Europe. Winning Cities and regions are those that are expected to generate higher and more sustainable 
levels  of  economic  growth,  underpinned  by  themes  such  as  urbanisation,  demographics,  technology  and  infrastructure 
improvements. The portfolio of 13 assets is fully situated in locations with GDP growth forecasts in the top two quartiles of 
all European regions (Source: Oxford Economics). 

The portfolio is diversified by location, sector, tenants and lease expiry. This enables the Group to tactically orientate the 
portfolio  over  time  in  order  to  benefit  from  structural  economic  and  sociodemographic  trends,  also  influenced  by  the 
varying cycles across different cities and sectors. A recent example of this is the strategic reduction in the Group's retail 
exposure and increase in the allocation to the higher growth logistics sector, which is now 19% of the portfolio, up from nil 
12 months ago. Having this flexibility and diversification also assists in improving the defensive characteristics of the asset 
base and the income profile over the long run. 

The assets are managed by the Investment Manager's local real estate teams, which total 180 professionals based on the 
ground across eight key markets in Europe. This local presence provides a competitive advantage in being able to identify 
sub-markets  and  assets  benefiting  from  local  market  trends  and  building  relationships  with  tenants  to  execute  asset 
management initiatives. In addition, Schroders' in-house economic and real estate research platform assists the Group with 
identifying and capitalising on broader macro and micro trends. 

The Group is now fully invested, with the strategy for the remainder of the year being focused on supporting NAV and 
income returns through current and planned active asset management. Delivering this strategy will underpin our ambition 
to  grow  the  Group  in  a  disciplined  way  that  will  improve  long-term  shareholder  returns.  The  delivery  of  these  asset 
management initiatives is also important to provide downside protection in a scenario where income and values come 
under pressure as a result of a deterioration in the economic or real estate market backdrop.  

Balance sheet and debt 
During the period the Group completed a new EUR8.6 million debt facility secured against the Rennes industrial acquisition. 
This loan takes the Group's total third party debt as at 31 March 2019 to EUR73.0million *, representing a Loan to Value ('LTV') 
of approximately 28% against the overall gross asset value of the Group.  

* Includes the Group's 50% share of external debt in the joint venture of EUR11.4m and excludes unamortised finance costs of EUR1.1m.

The  Group  has  a  strategy  of  maintaining  a  robust  balance  sheet  and  overall  leverage  is  capped  at  35%  at  the  time  of 
borrowing the debt. The Group has six debt facilities in place, with an average weighted total interest rate of 1.40% per 
annum. All interest rates are either fixed or capped to mitigate the risk of rising interest rates.  

There is various asset management activity, such as the lease regear and refurbishment at the Boulogne-Billancourt office 
in Paris, that will require capital investment and has the potential to provide attractive property returns. The Group has 
some additional debt capacity and regularly reviews other means of growing its available capital, such as raising equity or 
asset sales, in order to seek to optimise the overall capital structure for the Group's strategy.  

Dividend 
The Group has declared a second interim dividend in respect of the year ending 30 September 2019 of 1.85 euro cents per 
share payable on 22 July 2019 to shareholders on the register at 5 July 2019. The first and second interim dividends in 
respect of the year ending 30 September 2019 amount to 3.70 euro cents per share. 

The dividends for the six month period are 108% covered from net income from the portfolio. This includes a positive net 
impact of EUR1.26 million from the receipt of the final payment for the Hamburg lease surrender, which contributes towards 
covering the void at that property whilst we complete the re-leasing. Excluding the Hamburg surrender premium receipt, 
the dividend cover is 78%.  

The  latest  declared  dividend  represents  an  annualised  rate  of  5.5%  based  on  the  euro  equivalent  of  the  issue  price  at 
admission, again achieving the target dividend stated at IPO. Based on the Euro:GBP exchange rate as at 31 March 2019, 
this equates to an annualised rate of 6.5% on the GBP issue price at IPO of 100 pence per share.  

Asset management activity such as the lease regear at the Boulogne-Billancourt office investment will improve the longer-
term income profile of the Group, but will reduce dividend cover in the short term. In implementing the dividend strategy, 
the Board will consider the shorter term cash generation of the Company, alongside the longer term sustainable rental 
income from the portfolio.  

Outlook 
The global economic and political backdrop remains fragile. The Winning Cities we are invested in across Europe are better 
placed than many in respect of these risks, as they have higher levels of economic activity and are positioned to benefit 
from structural mega-themes such as urbanisation and infrastructure improvements. There are a number of opportunities 
to generate attractive returns from asset management and outperformance of certain markets, but also pockets of caution 
where income and value may come under pressure.      

The Group has a high-quality, diverse portfolio. Execution of the asset management initiatives across the portfolio will both 
strengthen  the  defensive  characteristics  of  the  Group  and  improve  the  long-term  capital  and  income  returns  for 
shareholders. 

Sir Julian Berney Bt.  
Chairman 
18 June 2019 

Investment Manager's Review 

Results 
The Group's NAV as at 31 March 2019 stood at EUR182.8 million (GBP157.3m), or 136.7 euro cents (118.0 pence) per share, achieving 
a NAV total return of 1.7% over the six months to 31 March 2019. 

The table below provides an analysis of the movement in NAV during the reporting period as well as a corresponding reconciliation 
in the movement in the NAV cents per share: 

                                                                                                                                       % change per 
NAV movement                                                                                 EURmillion(1)              Cps(2)               cps(3)
Brought forward as at 1 October 2018                                                              182.1                  136.2                    - 
Transaction costs of investments made during the period                                           (1.0)                  (0.7)                (0.5) 
Capital expenditure                                                                               (1.5)                  (1.1)                (0.8) 
Unrealised gain in valuation of the real estate portfolio                                           0.7                    0.5                  0.4 
EPRA earnings(4)                                                                                    5.4                    4.0                  2.9 
Non-cash/capital items                                                                            (0.4)                  (0.3)                (0.2) 
Dividends paid                                                                                    (2.5)                  (1.9)                (1.4) 
Carried forward as at 31 March 2019                                                               182.8                  136.7                  0.4 

(1)  Management reviews the performance of the Group principally on a proportionally consolidated basis. As a result, figures quoted   
     in this table include the Group's share of the Seville joint venture on a line-by-line basis. 
(2)  Based on 133,734,686 shares. 
(3)  Percentage change based on the starting NAV as at 1 October 2018. 
(4)  EPRA earnings as reconciled in note 8 of the condensed consolidated financial statements 
 

Market overview 
Economic  growth  forecasts  have  been  revised  down  over  the  last  3-6  months  and  Schroders  forecasts  now  that  Eurozone 
economic growth will slow from 1.8% in 2018 to 1.25-1.5% p.a. through 2019-2020. While short-term growth was impacted by 
political  turmoil  and  uncertainty  over  the  new  Italian  government,  Brexit  and  the  protests  in  France,  the  main  weak  spot  is 
manufacturing, reflecting slower growth in China and the US. Particularly Germany, with its big exposure to manufacturing, has 
seen forecasts revised down sharply. By contrast, consumer spending remains stable, supported by very healthy labour markets, 
higher pay awards, low inflation of around 1.5% p.a. and some softening in austerity measures combined with higher public sector 
spending. The benign outlook for inflation means that the European Central Bank is likely to wait until 2020 before raising the 
refinancing interest rate. The main upside risk is that consumer spending is stronger than forecast.  The main downside risks are 
continued lack of clarity on Brexit, an escalation of the US-China trade dispute and the threat of US-imposed tariffs on EU exports. 

Offices 
Most major European cities experienced a rise in office rents over the year to 31 March 2019. This widespread upswing reflects 
the sustained increase in employment, particularly in technology and professional services over the last five years and low volumes 
of completions. As a result, vacancy rates in Amsterdam, Brussels, the major German cities, Paris and Stockholm are at their lowest 
level in fifteen years and there is a particular shortage of new and modern office space suitable for new workplace configurations. 
At the same time, there remains a low level of new development. Consequently, while rental growth will probably start to slow, 
we expect the increase in office rents to continue through 2019-2020. 

Logistics/industrial 
The industrial and logistics sector is also seeing strong demand and rising rents, driven by the cyclical improvement in the economy 
and by the structural growth in online retailing. However, the increase in rents is less ubiquitous than in the office market and big 
cities  (e.g.  Berlin,  Madrid,  Munich,  Paris)  are  generally  seeing  faster  rental  growth  than  ports  or  other  distribution  hubs.  The 
difference is largely due to the greater availability of land for new building in the main logistics hubs of Benelux and the Ruhr, but 
development in big cities is also being held back by low unemployment and a shortage of warehouse staff. This is encouraging 
greater automation and, combined with the transition to electric vehicles, means that warehouses increasingly need to have a 
good power supply. 

Retail 
Despite the growth in consumer spending, demand for retail space in continental Europe remains in structural decline. The key 
challenge is the switch to online retail. The market is also being disrupted by discount retailers who are taking market share from 
mid-market retailers and are unwilling to pay the same level of rent.  The average vacancy rate in shopping centres has risen to 
8% and shopping centre rents fell in most countries in 2018 (source: PMA).  We believe that the most defensive retail types will 
be  shops  in  big  city  centres  and  tourist  destinations,  convenience  stores,  mid-sized  supermarkets  and  out-of-town  retail 
warehouses  selling  bulky  goods.  We  expect  that  department  stores,  shopping  centres  with  a  heavy  reliance  on  clothing  and 
footwear, shops in smaller cities and hypermarkets will suffer a sustained fall in rents.

Strategy 
The strategy over the period has focused on the following key objectives: 

-     Maintaining the annualised target dividend yield of 5.5%; 
-     Further strengthening of the portfolio's diversification qualities from a city, sector and income perspective; 
-     Achieving full investment through targeting Winning Cities and regions that experience higher levels of GDP, employment 
      and population growth than national averages; 
-     Execute asset management initiatives to improve both the long-term income profile and individual asset value; and 
-     Manage portfolio risk in order to enhance the portfolio's defensive qualities 

Progress has been made in executing the strategy and activity over the period which has delivered the following: 

-     Acquisition of an industrial property in Rennes, France (comprising two neighbouring warehouses) increasing the 
      Company's industrial warehousing weighting to 19% and improving the portfolio diversification from a sector, tenancy, age 
      profile and unexpired lease term perspective; 
-     Agreeing conditional heads of terms (post-period end) with Alten regarding their longer term occupation in the Company's 
      largest asset in Boulogne Billancourt, Paris and refurbishment of this asset; 
-     Securing new lease agreements with two tenants over c.40% of the Hamburg space, achieved at rents above business plan 
      and in detailed discussions for a further two floors; 
-     100% of the portfolio now located in higher growth cities and regions; 
-     Concluded three new leases and re-gears, generating a 9% increase in annualised income relative to previous rent at a 
      weighted lease term of 3 years 
-     Completion of a EUR0.8 million asset management initiative centred on improving the vibrancy, lighting, wayfaring and 
      signage for the Metromar Shopping Centre, Seville; 
-     Maintained the high occupancy level of 96%, with an average portfolio unexpired lease term of 6.5 years and 5.1 years to 
      break; and 
-     A prudent Loan to Value of 28% 

Our focus continues to be on driving income and total returns for the existing portfolio, managing risks and continuing to seek 
new investments to accelerate income growth. The specific next steps therefore include: 

1.    Conclusion of key asset management initiatives; 
           a)    Advancing the formal lease pre-commitment for the office investment in Boulogne Billancourt, Paris and 
                 progression of the redevelopment licences, construction contract and programme; 
           b)    Leasing the remaining c. 60% of vacant space in Hamburg; 
           c)    The opening of leisure specialist Urban Planet in Metromar, Seville which is expected in Q3 2019, which will add a 
                 further point of difference to the scheme, enhancing its appeal in a competitive local market; and 

2. Continue to actively engage with existing shareholders and potential new investors; and 

3. Consider opportunities to grow the Group, taking a disciplined approach in a way that will improve long-term shareholder returns. 

Acquisition update 
The Group has continued to focus on acquiring properties that increase its allocation to the high growth industrial and logistics 
sector and further diversify the portfolio.  

In March 2019, the Group completed the acquisition of two neighbouring industrial warehouses near Rennes, in Brittany, France, 
for EUR17.3 million, reflecting a net initial yield of 5.9%.   

Providing 23,852 sq.m of institutional quality space across two adjacent buildings, the property is let on a 12 year lease to C-Log, 
the logistics subsidiary of Groupe Beaumanoir, the international fashion retailer, which has invested significant capex in equipping 
the building with automated technology.  

The  property  is  located  at  the  junction  of  two  major  arterial  routes  and  benefits  from  excellent  sea,  high  speed  rail  and  air 
connectivity. In line with Schroders' Winning Cities strategy, Brittany is one of France's fastest growing regions in terms of GDP 
and population growth. 

Asset management update 
Key asset management over the period has centred on Metromar (Seville) and Boulogne-Billancourt (Paris). 

 Metromar, Seville (retail shopping centre)                               Boulogne-Billancourt, Paris (office) 
 
 Asset overview                                                           Asset overview 
 23,500 sq.m urban shopping centre with a tenancy mix centred             6,800 sq.m office building located in an established market in 
 on grocery, fashion and leisure that services a local, growing           Paris' Western Crescent  
 catchment 
 
 Asset strategy                                                           Asset strategy 
 Light refurbishment and strengthening of entertainment point             Repositioning opportunity regarding an office investment let off 
 of difference to improve occupancy and local retail dominance            modest rents and located in a supply constrained location with 
                                                                          competing demands for uses 
 
 Key activity                                                             Key activity 
 Dual strategy involving an EUR800,000 investment to improve              Advancement of feasibility analysis regarding redevelopment          
 vibrancy, lighting, signage and wayfinding (completed April              options. In conjunction we have agreed conditional heads of          
 2019) whilst adding an additional leisure anchor, trampoline             terms (post-period end) with the sitting tenant regarding their                       
 specialist Urban Planet (due to open in August 2019). Defensive          pre-commitment to a new longer term lease, in return for us      
 measures to increase property's appeal to visitors and tenants           refurbishing the building to grade A specification        
 and protect against new competition.                                     
 
 Reviewed the centre's BREEAM in-use certification. The                   
 centre achieved a rating of four stars (very good) for building 
 performance and five stars (excellent) for management. 


Other key asset management included signing two new leases in the Group's Hamburg investment: 

1. First floor totalling c. 927 sq.m leased to IT services specialist, Sentinel Systemlosungen GmbH for a 7 year term with an 
   option for another 3 year term. 

2. Fifth floor totalling c. 646 sq.m leased to education and training specialist Grone Wirtschaftsakademie GmbH for a 5 year term 
   with an option for another 5 year term. 

The combined annual rental terms have been concluded above target. 

We are also in detailed discussions for leasing a further two floors. 

Real Estate Portfolio 
Following  the  latest  Rennes  acquisition,  the  Group  now  owns  a  portfolio  of  thirteen  institutional  grade  properties  valued  at 
EUR240 million* as at 31 March 2019. The properties are 96% let and located across those Winning Cities and regions in France, 
Germany, Spain and the Netherlands. All investments are 100% owned except for the Metromar shopping centre, Seville, where 
the Group holds a 50% interest. 
                                                                    
*  Includes the Group's 50% share in the Seville property proportionally valued at EUR26.4m 

The top 10 properties comprise 92% of the portfolio value: 

                                                                                                  Value 
Rank                Property                      Country               Sector              EURm          % of total 
                                                                                             
1                   Paris (B-B)*                  France                Office              41.6                17% 
2                   Paris (SC)†                   France                Office              35.6                15% 
3                   Berlin                        Germany               Retail              26.9                11% 
4                   Seville                       Spain                 Retail              26.4                11% 
5                   Apeldoorn                     Netherlands           Mixed               20.0                 8% 
6                   Rennes                        France                Industrial          17.6                 7% 
7                   Stuttgart                     Germany               Office              16.4                 7% 
8                   Hamburg                       Germany               Office              15.3                 7% 
9                   Frankfurt                     Germany               Retail              11.5                 5% 
10                  Venray                        Netherlands           Industrial           9.6                 4% 
                    Top 10 properties                                                      220.9                92% 
11-13               Remaining three properties    Netherlands/France    Industrial          19.0                 8% 
                    Total                                                                  239.9               100% 

*  B-B refers to Boulogne-Billancourt 
†  SC refers to Saint-Cloud 


The table below sets out the top ten tenants which are from a diverse range of industry segments and represent 67% of the 
portfolio: 

                                                                           Contracted rent
Rank                Tenant                    Property                EURm          & of total    Wault break (yrs)     Wault expiry (yrs)          
1                   KPN                       Apeldoorn                2.4                 14%                  7.8                    7.8    
2                   Alten                     Paris (B-B)              2.4                 14%                  2.0                    2.0    
3                   Hornbach                  Berlin                   1.6                  9%                  6.8                    6.8    
4                   C-Log                     Rennes                   1.1                  7%                 11.9                   11.9    
5                   Filassistance             Paris (SC)               0.9                  5%                  2.8                    7.8    
6                   Cereal Partners France    Rumilly                  0.7                  4%                  6.1                    7.1    
7                   DKL                       Venray                   0.7                  4%                  9.5                    9.5    
8                   Land BW                   Stuttgart                0.7                  4%                  6.9                    7.3    
9                   Thesee                    Paris (SC)               0.6                  3%                  0.4                    0.4    
10                  Inventum Industrial       Houten                   0.6                  3%                  7.2                    7.2    
                    Total top ten tenants                             11.7                 67%                  6.0                    6.5    
                    Remaining tenants                                  5.5                 33%                  3.2                    6.5    
                    Total                                             17.2                100%                  5.1                    6.5    


The portfolio generates EUR17.2 million p.a. in contracted income. The average unexpired lease term is 5.1 years to first break and 
6.5 years to expiry. 

The  lease  expiry  profile  to  earliest  break  is  shown  on  page  17 of the condensed consolidated interm financial statements.  
The  near-term  lease  expiries  provide  asset  management opportunities  to  renegotiate  leases,  extend  weighted  average  unexpired  
lease  terms,  improve  income  security  and  generate rental growth. In turn, this activity benefits NAV total return. 

Portfolio performance  
The current portfolio value of EUR240 million‡ reflects an increase of 7.8% (EUR17.4 million) compared to the combined purchase price. 
Transaction costs have been fully recovered through valuation uplifts since acquisition.  
                                                                   
‡  Includes the Group's 50% share in the Seville property proportionally valued at EUR26.4m 

Overall,  external  valuations  remained  fairly  flat  over  the  six  months  to  the  end  of  March  2019.  A  notable  exception  was  the 
Hamburg property where the reduction in valuation was more than compensated for by the payment of the second tranche of 
the lease surrender premium by former tenant, City BKK.  

Over the last six months, the underlying property portfolio generated a total property return of 3.5% (non-annualised/3.1% when 
including  the  impact  from  transaction  costs  for  the  newly-acquired  property  in  Rennes).  Hereof,  portfolio  income  return 
amounted to 3.8% and portfolio capital return to -0.3% (net of capex). 

Sustainable investment 
Our approach to responsible investment has been continually upgraded over the last few years and we are increasingly seeking 
to assess and improve the positive impact of our investments. This involves incorporation of environmental, social and governance 
issues as well as, importantly, the impact of our investments on the built environment and climate change risks and opportunities. 
The Investment Manager is aware of the importance of the impact its activities have on local environments and the performance 
of this area is being continually measured. It was a founding member of the UK Green Building Council in 2007 and in 2017 became 
a member of the Better Buildings Partnership and a Fund Manager Member of GRESB.  

Over  the  period,  the  Company  had  the  Metromar  shopping  centre,  Seville,  reviewed  from  a  BREEAM  in-use  perspective.  The 
centre achieved a rating of four stars (very good) for building performance and five stars (excellent) for management. Both these 
ratings are expected to improve the portfolio's GRESB classification. 

Finance 
As at 31 March 2019, the Group's total external debt was EUR73.0 million*, across six loan facilities. This represents a conservative 
loan to value of 28% against the Group's gross asset value.  

* Includes the Group's 50% share of external debt in the joint venture of EUR11.4m and excludes unamortised  
  finance costs of EUR1.1m.

During the first six months of the financial year the Group completed one new debt facility with the newly acquired industrial 
property in Rennes (comprising two neighbouring warehouses) being part financed with a EUR8.6 million loan.  

The current blended all-in interest rate is 1.4%, significantly below the portfolio yield of 6.2% p.a, providing a favourable yield gap. 
The average unexpired loan term is 5.5 years. 

                                                                                         Outstanding 
Lender                         Property                  Maturity date                   principal(1)         Interest rate    
Deutsche Pfandbriefbank        Berlin/Frankfurt          30/06/2026                     EUR16,500,000                 1.31% 
                               Stuttgart/Hamburg         30/06/2023                     EUR14,000,000                 0.85%    
BRED Banque Populaire          Paris (SC)                15/12/2024                     EUR13,000,000    3M Euribor + 1.30%    
Munchener Hypothekenbank(1)    Seville (50%)             22/05/2024                     EUR11,678,750                 1.76%    
HSBC                           Netherlands industrial    27/09/2023                      EUR9,250,000    3M Euribor + 2.15%    
Saar LB                        Rennes                    28/03/2024                      EUR8,600,000    3M Euribor + 1.40%    
Total                                                                                   EUR73,028,750                          

(1) All statistics in the Investment Manager's report reflect a 50% ownership share of Seville. As a result, debt allocations for those  
    investments in the table above are similarly proportioned. 
 
The German and Spanish loans are fixed rate for the duration of the loan term. 

The French and Netherlands loans are based on a margin above 3 month Euribor. The Group has acquired interest rate caps to 
limit future potential interest costs if Euribor were to increase. The strike rate on the Paris loan interest rate cap is 1.25% p.a., on 
the Rennes loan cap is 1% p.a. and for the Netherlands loan is 1% p.a..  

Outlook  
GDP growth has slowed in Europe over the last six months, impacted by economic and political uncertainty. The majority of the 
major real estate markets continue to perform well. Occupational demand in leading European cities such as Paris, Berlin, 
Hamburg, Frankfurt and Amsterdam remains strong. In conjunction with this, the supply side remains balanced with disciplined 
bank lending reducing speculative development. These are all characteristics for positive rental growth and investment demand.    

Our immediate priority is centred on successfully executing our asset management programme. Successful conclusion of these 
asset management initiatives will improve the portfolio's income profile. This should enhance value and better support our 
continued ambition for the disciplined growth of the Company. 

Schroder Real Estate Investment Management Limited 
18 June 2019 
                                                                    

Directors' Report 

Principal risks and uncertainties 
The principal risks and uncertainties with the Company's business fall into the following risk categories: investment policy and 
strategic; economic and property market; investment management; custody; gearing and leverage; accounting, legal and 
regulatory; valuation; and service provider. A detailed explanation of the risks and uncertainties in each of these categories can 
be found on pages 27 to 30 of the Company's published Annual Report and Consolidated Financial Statements for the year 
ended 30 September 2018. The Company is aware of potential changes to tax legislation, one retrospective, which, if 
implemented, may impact the Company. The Company is monitoring these matters closely. Otherwise, these risks and 
uncertainties have not materially changed during the six months ended 31 March 2019 and are not expected to change during 
the remaining six months of the financial year. 

Going concern 
The Directors have examined significant areas of possible financial risk and have reviewed cash flow forecasts and compliance 
with the debt covenants, in particular the loan to value covenants and interest cover ratios. They have not identified any 
material uncertainties which would cast significant doubt on the Group's ability to continue as a going concern for a period of 
not less than twelve months from the date of the approval of the condensed consolidated interim financial statements. The 
Directors have satisfied themselves that the Group has adequate resources to continue in operational existence for the 
foreseeable future.  

Having assessed the principal risks and uncertainties, and the other matters discussed in connection with 
the viability statement as set out on page 30 of the published Annual Report and Consolidated Financial Statements for the year 
ended 30 September 2018, the Directors consider it appropriate to adopt the going concern basis in preparing the accounts. 

Related party transactions 
There have been no transactions with related parties that have materially affected the financial position or the performance of 
the Company during the six months ended 31 March 2019. Related party transactions are disclosed in note 13 of the condensed 
consolidated interim financial statements. 

Statement of Directors' responsibilities  
The Directors confirm that to the best of their knowledge: 

-    The half year report and condensed consolidated interim financial statements have been prepared in accordance with IAS 
     34 Interim Financial Reporting as adopted by the European Union; and 
-    The Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the Financial 
     Conduct Authority's Disclosure Guidance and Transparency Rules. 

Sir Julian Berney Bt. 
Chairman 
18 June 2019 


Condensed Consolidated Interim Statement of Comprehensive Income 
For the period ended 31 March 2019 

                                                                                                   Six months to    Six months to        Year to     
                                                                                                     31 Mar 2019      31 Mar 2018    30 Sep 2018    
                                                                                                         EUR'000          EUR'000        EUR'000    
                                                                                           Note      (unaudited)      (unaudited)      (audited)    
Rental and service charge income                                                              2            8,945           10,347         19,900    
Other income                                                                                  3            1,500            2,400          2,400    
Property operating expenses                                                                              (2,423)          (3,899)        (6,458)    
Net rental and related income                                                                              8,022            8,848         15,842    
Loss on disposal                                                                                               -                -           (29)    
Net (loss)/gain from fair value adjustment on investment 
property                                                                                      4          (1,566)            6,359          4,939    
Realised gain on foreign exchange                                                                              4                1              1    
Net change in fair value of financial instruments at fair value 
through profit or loss                                                                        5            (200)             (39)          (155)      
Dividends received from joint venture                                                         6                -                -            150    
Expenses                                                                                                                                            
Investment management fee                                                                    13            (947)            (849)        (1,958)    
Valuers' and other professional fees                                                                       (494)            (309)          (687)    
Administrator's and accounting fees                                                                        (165)            (147)          (330)    
Auditors' remuneration                                                                                     (191)            (134)          (269)    
Directors' fees                                                                              13             (72)             (62)          (115)    
Other expenses                                                                                             (129)            (119)          (206)    
Total expenses                                                                                           (1,998)          (1,620)        (3,565)    
Operating profit                                                                                           4,262           13,549         17,183    
Finance income                                                                                               226              378            456    
Finance costs                                                                                              (402)            (502)          (962)    
Net finance costs                                                                                          (176)            (124)          (506)    
Share of (loss)/profit of joint venture                                                       6             (71)              292            407    
Profit before taxation                                                                                     4,015           13,717         17,084    
Taxation                                                                                      7            (818)            (815)        (1,517)    
Profit after taxation                                                                                      3,197           12,902         15,567    
Attributable to:                                                                                                                                    
Owners of the parent                                                                                       3,197           10,798         13,175    
Non-controlling interests                                                                                      -            2,104          2,392    
                                                                                                           3,197           12,902         15,567    
Basic and diluted earnings per share attributable to 
owners of the parent                                                                          8             2.4c             8.1c           9.9c    
Profit for the period/year                                                                                 3,197           12,902         15,567    

Other comprehensive income:                                                                                                                         
Other comprehensive loss items that may be reclassified to                                                                                          
profit or loss:                                                                                                                                     
Currency translation differences                                                                             (6)                -            (4)    
Total other comprehensive loss                                                                               (6)                -            (4)    
Total comprehensive income for the period/year                                                             3,191           12,902         15,563    

Attributable to:                                                                                                                                    
Owners of the parent                                                                                       3,191           10,798         13,171    
Non-controlling interests                                                                                      -            2,104          2,392    
                                                                                                           3,191           12,902         15,563    

All items in the above statement are derived from continuing operations. The accompanying notes 1 to 16 form an integral part 
of the condensed consolidated interim financial statements. 


Condensed Consolidated Interim Statement of Financial Position 
As at 31 March 2019 
                                                                                                     31 Mar 2019      30 Sep 2018    31 Mar 2018
Assets                                                                                    Notes          EUR'000          EUR'000        EUR'000    
Non-current assets                                                                                   (unaudited)        (audited)    (unaudited)    
Investment property                                                                           4          213,174         195,644         166,173    
Investment in joint venture                                                                   6            6,626            6,697          6,582    
Loans to joint venture                                                                                    10,035           10,035         10,035    
Non-current assets                                                                                       229,835          212,376        182,790    
Trade and other receivables                                                                                5,773           12,537            850    
Interest rate derivative contracts                                                            5              121              188            232    
Cash and cash equivalents                                                                                 15,166           15,738         21,268    
Current assets                                                                                            21,060           28,463         22,350    
Assets of disposal group held for sale                                                                         -                -         70,389    
Total assets                                                                                             250,895          240,839        275,529    
Equity                                                                                                                                              
Share capital                                                                                             15,540           15,015         15,215    
Share premium                                                                                             30,959           29,912         30,310    
Retained earnings                                                                                          5,120            4,397          9,442    
Other reserves                                                                                          131,167          132,745        132,151     
Equity attributable to owners of the parent                                                              182,786          182,069        187,118    
Non-controlling interest                                                                                       -                -          9,795    
Total equity                                                                                             182,786          182,069        196,913    
Liabilities                                                                                                                                         
Non-current liabilities                                                                                                                             
Interest-bearing loans and borrowings                                                         9          60,506            52,150        43,079     
Deferred tax liability                                                                        7            1,061              912            883    
Non-current liabilities                                                                                   61,567           53,062         43,962    
Current liabilities                                                                                                                                 
Trade and other payables                                                                                   5,619            5,081          3,980    
Current tax liabilities                                                                       7              923              627            114    
Current liabilities                                                                                        6,542            5,708          4,094    
Liabilities of disposal group held for sale                                                                    -                -         30,560    
Total liabilities                                                                                         68,109           58,770         78,616    
Total equity and liabilities                                                                             250,895          240,839        275,529    
Net Asset Value per ordinary share                                                           11           136.7c           136.2c         139.9c    
 
The accompanying notes 1 to 16 form an integral part of the condensed consolidated interim financial statements. 


Condensed Consolidated Interim Statement of Changes in Equity 
For the period ended 31 March 2019 

                                                            Share      Share    Retained       Other      Owners of    on-controlling      Total    
                                                  Note    capital    premium    earnings    reserves     the parent         interests     equity    
                                                          EUR'000    EUR'000     EUR'000     EUR'000        EUR'000           EUR'000    EUR'000    
Balance as at 1 October 2018                               15,015     29,912       4,397     132,745        182,069                 -    182,069    
Profit for the period                                           -          -       3,197           -          3,197                 -      3,197    
Other comprehensive loss for the year                           -          -           -         (6)            (6)                 -        (6)    
Dividends paid                                      12          -          -     (2,474)           -        (2,474)                 -    (2,474)    
Unrealised foreign exchange                                   525      1,047           -     (1,572)              -                 -          -    
Balance as at 31 March 2019 (unaudited)                    15,540     30,959       5,120     131,167        182,786                 -    182,786     
Balance as at 1 October 2017                               15,167     30,215         650     132,294        178,326             7,691    186,017    
Profit for the year                                             -          -      13,175           -         13,175             2,392     15,567    
Other comprehensive loss for the 
year                                                            -          -           -         (4)            (4)                 -        (4)    
Dividends paid                                      12          -          -     (9,428)           -        (9,428)                 -    (9,428)    
Share premium distribution                                      -          -           -           -              -           (1,510)    (1,510)    
Divestment of non-controlling 
interests                                                       -          -           -           -              -           (8,573)    (8,573)    
Unrealised foreign exchange                                 (152)      (303)           -         455              -                 -          -    
Balance as at 30 September 2018 (audited)                  15,015     29,912       4,397     132,745        182,069                 -    182,069      
Balance as at 1 October 2017                               15,167     30,215         650     132,294        178,326             7,691    186,017    
Profit for the period                                           -          -      10,798           -         10,798             2,104     12,902    
Dividends paid                                      12          -          -     (2,006)           -        (2,006)                 -    (2,006)    
Unrealised foreign exchange                                    48         95           -       (143)              -                 -          -    
Balance as at 31 March 2018 (unaudited)                    15,215     30,310       9,442     132,151        187,118             9,795    196,913    
 
The accompanying notes 1 to 16 form an integral part of the condensed consolidated interim financial statements. 


Condensed Consolidated Interim Statement of Cash Flows 
For the period ended 31 March 2019 
                                                                                                   Six months to    Six months to        Year to    
                                                                                                     31 Mar 2019      31 Mar 2018    30 Sep 2018    
                                                                                           Note          EUR'000          EUR'000        EUR'000    
                                                                                                     (unaudited)      (unaudited)      (audited)    
Operating activities                                                                                                                                
Profit before tax for the period/year                                                                      4,015           13,717         17,084    
Adjustments for:                                                                                                                                    
Loss on disposal                                                                                               -                -             29    
Net loss/(gain) from fair value adjustment on investment property                             4            1,566          (6,359)        (4,939)    
Share of loss/(profit) of joint venture                                                       6               71            (292)          (407)    
Realised foreign exchange gains                                                                              (4)              (1)            (1)    
Finance income                                                                                             (226)            (378)          (456)    
Finance costs                                                                                                402              502            962    
Net change in fair value of financial instruments at fair value through profit or loss        5              200               39            155    
Dividends received from joint venture                                                         6                -                -          (150)    
Operating cash generated before changes in working capital                                                 6,024            7,228         12,277    
Decrease/(Increase) in trade and other receivables                                                         6,761            (113)        (3,122)    
Increase in trade and other payables                                                                         259              816          2,300    
Cash generated from operations                                                                            13,044            7,931         11,455    
Finance costs paid                                                                                         (569)            (664)        (1,255)    
Finance income received                                                                                      226              381            456    
Tax paid                                                                                      7            (373)            (224)          (384)    
Net cash generated from operating activities                                                              12,328            7,424         10,272    

Investing activities                                                                                                                                
Acquisition of investment property                                                                      (18,013)         (21,070)       (51,992)    
Additions to investment property                                                                           (878)            (123)              -    
Proceeds from disposal of investment property                                                                  -                -         19,740    
Receipt of loan repayment                                                                                      -                -          7,215    
Dividends received from joint venture                                                         6                -                -            150    
Net cash used in investing activities                                                                   (18,891)         (21,193)       (24,887)    

Financing activities                                                                                                                                
Proceeds from borrowings                                                                      9            8,600           13,000         13,000    
Interest rate cap purchased                                                                   5            (133)            (227)          (227)    
Dividends paid                                                                               12          (2,474)          (2,006)        (9,428)    
Share premium distribution                                                                                     -                -        (1,510)    
Net cash generated from financing activities                                                               5,993           10,767          1,835    
Net decrease in cash and cash equivalents for the period/year                                              (570)          (3,002)       (12,780)    
Opening cash and cash equivalents                                                                         15,738           28,521         28,521    
Effects of exchange rate change on cash                                                                      (2)                1            (3)    
Transfer to disposal group held for sale                                                                       -          (4,252)              -    
Closing cash and cash equivalents                                                                         15,166           21,268         15,738    

The accompanying notes 1 to 16 form an integral part of the condensed consolidated financial statements 


Notes to the Condensed Consolidated Interim Financial Statements 

1.   Significant accounting policies 
The Company is a closed-ended investment company incorporated in England and Wales. The condensed consolidated interim 
financial statements of the Company for the period ended 31 March 2019 comprise those of the Company and its subsidiaries 
(together referred to as the 'Group'). The shares of the Company are listed on the London Stock Exchange (Primary listing) and 
the Johannesburg Stock Exchange (Secondary listing). The registered office of the Company is 1 London Wall Place, London EC2Y 5AU. 

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 
434 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2018 were approved by the Board of 
Directors on 30 November 2018 and were delivered to the Registrar of Companies. The report of the auditors on those accounts 
was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the 
Companies Act 2006. 

These condensed consolidated interim financial statements have been reviewed and not audited. 

Statement of compliance 
The condensed consolidated interim financial statements have been prepared in accordance with the Disclosure Guidance and 
Transparency Rules of the United Kingdom Financial Conduct Authority and IAS 34 Interim Financial Reporting as adopted by the 
European Union ("EU"). They do not include all of the information required for the full annual financial statements and should 
be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 30 September 2018. 
The condensed consolidated interim financial statements have been prepared on the basis of the accounting policies set out in 
the Group's consolidated financial statements for the year ended 30 September 2018. The consolidated financial statements for 
the year ended 30 September 2018 have been prepared in accordance with International Financial Reporting Standards ("IFRS") 
as adopted by the EU. The Group's annual financial statements refer to new Standards and Interpretations none of which had a 
material impact on the financial statements. 

Basis of preparation 
The condensed consolidated interim financial statements are presented in euros rounded to the nearest thousand. They are 
prepared on a going concern basis, applying the historical cost convention except for the measurement of investment property 
and derivative financial instruments that have been measured at fair value. 

The accounting policies have been consistently applied to the results, assets, liabilities and cash flow of the entities included in 
the condensed consolidated interim financial statements and are consistent with those of the year end financial report. 

During the period the Group adopted the following standards:  

IFRS 9 - Financial instruments 
The new standard results in changes in the classification of all financial assets excluding derivatives. This reclassification does 
not have an impact on the financial statements. 

The new standard introduces an expected credit loss model, requiring expected credit losses to be recognised on all financial 
assets held at amortised cost.  

This new IFRS 9 impairment model requires impairment allowances for all exposures from the time a loan is originated, based 
on the deterioration of credit risk since initial recognition. If the credit risk has not increased significantly (Stage 1), IFRS 9 
requires allowances based on twelve month expected losses. If the credit risk has increased significantly (Stage 2) and if the loan 
is 'credit impaired' (Stage 3), the standard requires allowances based on lifetime expected losses. The assessment of whether a 
loan has experienced a significant increase in credit risk varies by product and risk segment. It requires use of quantitative 
criteria and experienced credit risk judgement. 

The expected credit risk model has been applied to the joint venture loan and trade receivables. IFRS 9 does not apply to any 
other assets held by the Group. 

There is no material quantitative impact for the period ended 31 March 2019 upon application of this new accounting policy for 
assessing asset impairment. The Group will continue to assess the financial assets periodically using the credit loss model and 
recognise an expected credit loss if required. 

IFRS 15 - Revenue from contracts with customers  
The new standard sets out a five-step model for the recognition of revenue and establishes principles for reporting useful 
information to users of financial statements about the nature, timing and uncertainty of revenues and cash flows arising from 
an entity's contracts with customers. The new standard does not apply to rental income which is in the scope of IAS 17, but does 
apply to service charge income, management and performance fees and trading property disposals. Adoption of IFRS 15 has not 
had a quantitative impact upon the Group's financial statements. It has resulted in some minor qualitative disclosure in relation 
to some revenue items, as detailed in Note 2 to the condensed consolidated interim financial statements, the service charge 
income has been separated from rental income. 

IFRS 16 - Leases 
The new standard requires recognition on the balance sheet for the head rent payable by a lessee over the lease term. For 
lessees, it will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance 
leases will be removed. The accounting for lessors will not significantly change. These changes are not expected to have any 
impact on the consolidated financial statements of the Group as it does not hold any leasehold properties.  

IFRS 16 was effective from 1 January 2019 but has not been early adopted by the Group. 

Going concern 
The Directors have examined significant areas of possible financial risk including cash and cash requirements and compliance 
with the debt covenants. The Directors have not identified any material uncertainties which would cast significant doubt on the 
Group's ability to continue as a going concern for a period of not less than twelve months from the date of the approval of the 
condensed consolidated interim financial statements. The Directors have satisfied themselves that the Group has adequate 
resources to continue in operational existence for the foreseeable future.  

Use of estimates and judgements  
The preparation of financial statements in conformity with IFRS, as adopted by the EU, requires management 
to make judgements, estimates and assumptions that affect the application of policies and the reported 
amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based 
on historical experience and various other factors that are believed to be reasonable under the circumstances, 
the results of which form the basis of making judgements about the carrying values of assets and liabilities that 
are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and 
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in 
the period in which the estimates are revised and in any future periods affected.  

The most significant estimates made in preparing the condensed consolidated interim financial statements relate to the carrying 
value of investment properties (as disclosed in note 4, including those within joint ventures) which are stated at fair value. Fair 
value is inherently subjective because the valuer makes assumptions which may not prove to be accurate. The Group uses 
external professional valuers to determine the relevant amounts.  

A key area of judgement is accounting for transactions. These include judgements on whether the criteria for assets and 
liabilities held for sale have been met for transactions not yet completed; and accounting for transaction costs and contingent 
consideration. Management use the most appropriate accounting treatment for each transaction and seek independent advice 
where necessary. 

Another key area of judgement is tax provisioning and disclosure. Management use external tax advisers to monitor changes to 
Group's financial statements. Where changes to tax laws give rise to a contingent liability the Group discloses these 
appropriately within the notes to the financial statements. 

Segmental reporting 
The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment, and in 
one geographical area, Continental Europe. The chief operating decision-maker is considered to be the Board of Directors who 
are provided with consolidated IFRS information on a quarterly basis. 

Financial risk factors 
The Directors are not aware of significant changes to the financial risk profile of the Group since the end of the last annual 
financial reporting period for the year ended 30 September 2018. 

The main risks arising from the Group's financial instruments and investment properties are: market price risk, currency risk, 
credit risk, liquidity risk and interest rate risk. The Board regularly reviews and agrees policies for managing each of these risks. 

2.   Rental and service charge income 
                                                                                    Six months to      Six months to          Year to     
                                                                                      31 Mar 2019        31 Mar 2018      30 Sep 2018    
                                                                                          EUR'000            EUR'000          EUR'000    
                                                                                      (unaudited)        (unaudited)        (audited)    
Rental income                                                                               6,976              6,688           13,708    
Service charge income                                                                       1,969              3,659            6,192    
Total                                                                                       8,945             10,347           19,900    
     

3.   Other income 
Other income relates to a lease surrender premium agreement pursuant to the Company's Hamburg office asset in Germany. 
EUR1.5m was received in the six months ended 31 March 2019 and EUR2.4m was received during the year ended 30 September 2018. 

4.   Investment property 
                                                                                                                             Freehold  
                                                                                                                              EUR'000  
Fair value at 30 September 2017 (audited)                                                                                     202,563    
Property acquisitions                                                                                                          21,127    
Additions                                                                                                                         124     
Net valuation gain on investment property                                                                                       6,359     
Sub-total                                                                                                                     230,173    
Transfer to disposal group held for sale                                                                                     (64,000)    
Fair value as at 31 March 2018 (unaudited)                                                                                    166,173    
Property acquisitions                                                                                                          27,042    
Acquisition costs                                                                                                               3,849    
Net valuation loss on investment property                                                                                     (1,420)    
Fair value as at 30 September 2018 (audited)                                                                                  195,644    
Property acquisitions                                                                                                          18,211     
Additions                                                                                                                         885    
Net valuation loss on investment property                                                                                     (1,566)    
Fair value as at 31 March 2019 (unaudited)                                                                                    213,174     

The fair value of investment properties, as determined by the valuer, totals EUR213,530,000 (30 September 2018: EUR195,950,000) 
with the valuation amount relating to a 100% ownership share for all the assets in the portfolio. 

None of this amount is attributable to trade or other receivables in connection with lease incentives. The fair value of 
investment properties per the condensed consolidated interim financial statements of EUR213,174,000 includes a tenant incentive 
adjustment of EUR356,000 (30 September 2018: EUR306,000). 

The fair value of investment property has been determined by Knight Frank LLP, a firm of independent chartered surveyors, who 
are registered independent appraisers. The valuation has been undertaken in accordance with the RICS Valuation - Global 
Standards 2017, incorporating the International Valuations Standards, and RICS Professional Standards UK January 2014 (revised April 2015).  

The properties have been valued on the basis of 'fair value' in accordance with the RICS Valuation - Professional Standards VPS4 
(1.5) Fair Value and VPGA1 Valuations for Inclusion in Financial Statements which adopt the definition of fair value used by the 
International Accounting Standards Board. 

The valuation has been undertaken using appropriate valuation methodology and the Valuer's professional judgement. The 
Valuer's opinion of fair value was primarily derived using recent comparable market transactions on arm's length terms, where 
available, and appropriate valuation techniques ('the investment method'). 

The properties have been valued individually and not as part of a portfolio.

All investment properties are categorised as Level 3 fair values as they use significant unobservable inputs. There have not been 
any transfers between levels during the period. Investment properties have been classed according to their real estate sector. 
Information on these significant unobservable inputs per class of investment property is disclosed below: 

Quantitative information about fair value measurement using unobservable inputs (Level 3) as at 31 March 2019 (unaudited). 

                                                                            Retail (including 
                                                             Industrial     retail warehouse)             Office              Total   
Fair value (EUR'000)                                         EUR46,280              EUR91,150         EUR128,900      EUR266,330(3) 
Area ('000 sq.m)                                                68,806                 44,365             60,429            173,600  
Net passing rent                Range                      39.78-99.84           94.73-140.72       47.46-350.03       39.78-350.03 
EUR per sq.m per annum          Weighted average(2)              48.29                 114.02             209.39             148.76 
Gross ERV EUR per sq.m          Range                      38.00-89.40          101.58-187.50       79.76-419.91       38.00-419.91 
per annum                       Weighted average(2)              48.44                 158.43             239.77             178.69 
Net initial yield(1)            Range                        5.64-7.43              4.79-5.38         1.79-11.40         1.79-11.40  
                                Weighted average(2)               6.38                   4.99               6.70               6.06 
Equivalent yield                Range                        5.50-7.00              5.10-5.98         4.23-10.44         4.23-10.44  
                                Weighted average(2)               6.25                   5.76               6.17               6.04 

Notes: 
(1)  Yields based on rents receivable after deduction of head rents and non-recoverables. 
(2)  Weighted by market value. 
(3)  This table includes the joint venture investment property valued at EUR52.8 million which is disclosed within the summarised  
     information within note 6 as part of total assets. 
 
Quantitative information about fair value measurement using unobservable inputs (Level 3) as at 30 September 2018 (audited). 


                                                                            Retail (including 
                                                             Industrial     retail warehouse)             Office              Total 
Fair value (EUR'000)                                             28,600                89,650            129,700         247,950(3) 
Area ('000 sq.m)                                                 43,666                44,336             60,423            148,425 
Net passing rent                Range                       39.84-97.94          94.73-140.01       63.24-349.98       39.84-349.98 
EUR per sq.m per annum          Weighted average(2)               51.48                115.88             210.84             158.12 
Gross ERV EUR per sq.m          Range                       38.00-89.43         101.58-189.45       76.76-419.91       38.00-419.91 
per annum                       Weighted average(2)               51.61                159.74             239.88             189.19 
Net initial yield(1)            Range                         6.04-7.33             4.90-5.52         2.46-11.00         2.46-11.00 
                                Weighted average(2)                6.75                  5.10               6.69               6.12 
Equivalent yield                Range                         6.01-7.00             5.10-5.95         4.43-10.10         4.43-10.10  
                                Weighted average(2)                6.62                  5.78               6.15               6.07 

Notes:  
(1)  Yields based on rents receivable after deduction of head rents and non-recoverables. 
(2)  Weighted by market value. 
(3)  This table includes the joint venture investment property valued at EUR52.0 million which is disclosed within the summarised 
     information within note 6 as part of total assets.   
 
Sensitivity of measurement to variations in the significant unobservable inputs 

The significant unobservable inputs used in the fair value measurement (categorised within Level 3 of the fair value hierarchy of 
the Group's property portfolio), together with the impact of significant movements in these inputs on the fair value 
measurement, are shown below: 

                        Impact on fair value measurement of      Impact on fair value measurement of 
                        significant increase in input            significant decrease in input
Passing rent            Increase                                 Decrease                               
Gross ERV               Increase                                 Decrease                               
Net initial yield       Decrease                                 Increase                               
Equivalent yield        Decrease                                 Increase                               

 
There are interrelationships between the yields and rental values as they are partially determined by market rate conditions. 
The sensitivity of the valuation to changes in the most significant inputs per class of investment property is shown below: 

Estimated movement in fair value of investment                          Industrial          Retail         Office          Total    
properties at 31 March 2019 (unaudited)                                    EUR'000         EUR'000        EUR'000        EUR'000    
Increase in ERV by 5%                                                        1,350           3,550          2,000          6,900    
Decrease in ERV by 5%                                                       -1,350          -3,550         -2,000         -6,900    
Increase in net initial yield by 0.25%                                      -1,850          -4,000         -6,400        -12,250    
Decrease in net initial yield by 0.25%                                       2,050           4,400          7,100         13,550    

Estimated movement in fair value of investment properties               Industrial          Retail         Office          Total    
at 30 September 2018 (audited)                                             EUR'000         EUR'000        EUR'000        EUR'000    
Increase in ERV by 5%                                                          800           3,500          5,700         10,000    
Decrease in ERV by 5%                                                         -900          -3,500         -5,550         -9,950    
Increase in net initial yield by 0.25%                                      -1,150          -4,000         -6,000        -11,150    
Decrease in net initial yield by 0.25%                                       1,100           4,350          6,700         12,150    


5.   Derivative financial instruments 
The Group has an interest rate cap in place which was purchased for EUR227,000 from BRED Banque Populaire on 15 December 
2017 in connection to a EUR13.0m loan facility drawn from the same bank with a maturity date of 15 December 2024. The interest 
rate cap is 1.25% with a floating rate option being Euribor 3 months. In line with IFRS 9, this derivative is reported in the 
condensed consolidated interim financial statements at its fair value. As at 30 September 2018 the fair value of the interest rate 
cap was EUR188,000. The notional value of the instrument is EUR13.0 million. As at 31 March 2019 the fair value of the interest rate 
cap was EUR58,000, giving a valuation decrease as shown within the Statement of Comprehensive Income of EUR130,000. 

During the period the group entered into an interest rate cap purchased for EUR87,000 from HSBC Bank Plc on 31 October 2018 in 
connection to a EUR9.25 million loan facility drawn from the same bank with a maturity date of 27 September 2023. The cap 
interest rate is 1.0% with a floating rate option being Euribor 3 months. In line with IFRS 9, this derivative is reported in the 
condensed consolidated interim financial statements at its fair value. As at 31 March 2019 the fair value of the interest rate cap 
was EUR17,000, giving a valuation decrease as shown in the Statement of Comprehensive Income of EUR70,000. 

During the period the Group entered into an interest rate cap purchased for EUR46,000 from Landesbank Saar on 27 March 2019 
in connection with an EUR8.6 million loan facility drawn from the same bank with a maturity date of 27 March 2024. The interest 
rate cap is 1.0% with a floating rate option being Euribor 3 months. In line with IFRS 9, this derivative is reported in the 
condensed consolidated interim financial statements at its fair value. As at 31 March 2019 the fair value of the interest rate cap 
was EUR46,000. There was no movement in the fair value of the interest rate cap as at 31 March 2019.  

Transaction costs incurred in obtaining the instruments are amortised over the extended period of the above-mentioned loans. 

6.   Investment in joint ventures 
The Group has a 50% interest in a joint venture called Urban SEREIT Holdings Spain S.L. The principal place of business of the 
joint venture is Calle Velazquez 3, 4th Madrid 28001 Spain. 

                                                                                31 Mar 2019    
                                                                                    EUR'000    
Balance as at 1 October 2018 (audited)                                                6,697    
Share of loss for the period                                                           (71)    
Balance as at 31 March 2019 (unaudited)                                               6,626  

                                                                                31 Mar 2018    
                                                                                    EUR'000    
Balance as at 1 October 2017 (audited)                                                6,290    
Share of profit for the year                                                            442    
Dividends                                                                             (150)    
Balance as at 31 March 2018 (unaudited)                                               6,582    

                                                                                30 Sep 2018    
                                                                                    EUR'000    
Balance as at 1 October 2017 (audited)                                                6,290    
Share of profit for the year                                                            557    
Dividends                                                                             (150)    
Balance as at 30 September 2018 (audited)                                             6,697    


                                                                                   31 Mar 2019        31 Mar 2018       30 Sep 2018    
Summarised joint venture financial information:                                        EUR'000            EUR'000           EUR'000    
Total assets                                                                            58,861             59,586            58,444    
Total liabilities                                                                     (45,609)           (46,422)          (45,050)    
Net assets                                                                              13,252             13,164            13,394    
Net asset value attributable to the Group                                                6,626              6,582             6,697    
                                                               
                                                                                 Six months to      Six months to    Year to 30 Sep    
                                                                                   31 Mar 2019        31 Mar 2018              2018    
                                                                                       EUR'000            EUR'000           EUR'000    
                                                                                   (unaudited)        (unaudited)         (audited)    
Revenues                                                                                 2,826              2,838             5,464    
Total comprehensive (loss)/profit                                                        (142)                884             1,114    
Total comprehensive (loss)/profit attributable to the Group                               (71)                442               557    


7.   Taxation                                                                                              
                                                                                 Six months to      Six months to           Year to     
                                                                                  31 Mar  2019        31 Mar 2018       30 Sep 2018    
                                                                                       EUR'000            EUR'000           EUR'000    
                                                                                   (unaudited)        (unaudited)         (audited)    
Current tax charge                                                                         669                405             1,078    
Deferred tax charge                                                                        149                410               439    
Tax expense in period/year                                                                 818                815             1,517  

                                                                                                      Current tax      Deferred tax    
                                                                                                        liability         liability    
                                                                                                          EUR'000           EUR'000    
As at 1 October 2018 (audited)                                                                                627               912    
Tax charge for the period                                                                                     669               149    
Tax paid during the period                                                                                  (373)                 -    
Balance as at 31 March 2019 (unaudited)                                                                       923             1,061 

                                                                                                      Current tax      Deferred tax    
                                                                                                        liability         liability    
                                                                                                          EUR'000           EUR'000    
As at 1 October 2017 (audited)                                                                               (67)               473    
Tax charge for the period                                                                                     405               410    
Tax paid during the period                                                                                  (224)                 -    
Balance as at 31 March 2018 (unaudited)                                                                       114               883 

                                                                                                      Current tax      Deferred tax    
                                                                                                        liability         liability    
                                                                                                          EUR'000           EUR'000    
As at 1 October 2017 (audited)                                                                               (67)               473    
Tax charge for the period                                                                                   1,078               439    
Tax paid during the period                                                                                  (384)                 -    
Balance as at 30 September 2018 (audited)                                                                     627               912    

Under the current Double Taxation Treaty between France and Luxembourg, dividends paid by OPPCI SEREIT France to SEREIT 
Holdings are subject to withholding tax at a rate of 5% and are exempt from further taxation in Luxembourg. However, this 
Treaty has been in the process of renegotiation. Proposed changes to the Treaty mean, amongst other things, that dividends 
paid by OPPCI SEREIT France to SEREIT Holdings could be subject to 30% withholding tax and may incur further tax charges in 
Luxembourg. 

The new Double Taxation Treaty will come in to force on 1 January 2020, subject to the completion of the ratification process by 
both governments. As at 31 March 2019 the Treaty had not been fully ratified. It is expected that the company will recognise an 
additional deferred tax liability of EUR1.4m upon completion of the ratification process, reflecting the potential tax liability relating 
to unrealised gains arising within OPPCI SEREIT France. 

In April 2019 the European Commission ("EC")  issued a ruling that a UK group financing exemption within the UK Controlled 
Foreign Company rules was partially in breach of the European Union State aid rules. The Group has made claims to apply this 
exemption in respect of SEREIT (Jersey) Limited which provides financing to other group companies, and this ruling may result in 
additional tax liabilities becoming payable. The UK government has not yet indicated whether it intends to appeal against the 
ruling, and nor has it published the mechanism for calculating the tax due. Accordingly the sum potentially payable cannot be 
accurately measured at this time. 

8.   Basic and diluted earnings per share  
The basic and diluted earnings per share for the Group is based on the net profit for the period, excluding non-controlling 
interests and currency translation differences, of EUR3,197,000 (six months to 31 March 2018: EUR10,798,000, for year ended 30 
September 2018: EUR13,175,000) and the weighted average number of ordinary shares in issue during the period of 133,734,686 
(six months to 31 March 2018: 133,734,686, year to 30 September 2018: 133,734,686). 


EPRA* earnings reconciliation 
                                                                                 Six months to      Six months to           Year to     
                                                                                  31 Mar  2019        31 Mar 2018       30 Sep 2018    
                                                                                       EUR'000            EUR'000           EUR'000    
                                                                                   (unaudited)        (unaudited)         (audited)    
Total IFRS comprehensive income                                                          3,191             12,902            15,563    
Adjustments to calculate EPRA Earnings:                                                                                                
Net loss/(gain) from fair value adjustment on investment property                        1,566            (6,359)           (4,939)    
Currency translation differences (unrealised)                                                6                  -                 4    
Loss on disposal of investment properties, development 
properties held for investment and other interests                                           -                  -                29    
Withholding tax on profits on disposal                                                       -                  -               279    
Share of joint venture loss/(gain) on investment property                                  264              (156)               (8)    
Non-controlling interest's net revenue                                                       -              (378)             (692)    
Deferred tax                                                                               149                410               439    
Net change in fair value of financial instruments                                          200                 39               155    
EPRA Earnings                                                                            5,376              6,458            10,830    
Weighted average number of ordinary shares                                         133,734,686        133,734,686       133,734,686    
IFRS Earnings per share (cents per share)                                                  2.4                8.1               9.9    
EPRA Earnings per share (cents per share)                                                  4.0                4.8               8.1    

Headline† earnings reconciliation                                                                                                                                  
                                                                                 Six months to      Six months to           Year to     
                                                                                  31 Mar  2019        31 Mar 2018       30 Sep 2018  
                                                                                       EUR'000            EUR'000           EUR'000    
                                                                                   (unaudited)        (unaudited)         (audited)    
Total IFRS comprehensive income                                                          3,191             12,902            15,563    
Net valuation (loss)/profit on investment property                                       1,566            (6,359)           (4,939)    
Profits on disposal of investment properties, development 
properties held for investment and other interests                                           -                  -                29    
Withholding tax on profits on disposal                                                       -                  -               279    
Share of joint venture (loss)/gain on investment property                                  264              (156)               (8)    
Non-controlling interest's net revenue                                                       -              (378)             (692)    
                                                                  
Deferred tax                                                                               149                410               439    
Net change in fair value of financial instruments                                          200                 39               155    
Headline earnings                                                                        5,370              6,458            10,826    
Weighted average number of ordinary shares                                         133,734,686        133,734,686       133,734,686    
Headline Earnings per share (cents per share)                                              4.0                4.8               8.1    
 
*  European Public Real Estate Association ('EPRA') earnings per share reflects the underlying performance of the company calculated 
   in accordance with the EPRA guidelines. 
†  Headline earnings per share reflects the underlying performance of the company calculated in accordance with the Johannesburg Stock   
   Exchange listing requirements. 

9.   Interest-bearing loans and borrowings                                 
                                                                                                                      Six months to     
                                                                                                                        31 Mar 2019    
As at 1 October 2018 (audited)                                                                                               52,150    
Drawdown of borrowings                                                                                                        8,600    
Capitalisation of finance costs                                                                                               (299)    
Amortisation of finance costs                                                                                                    55    
As at 31 March 2019 (unaudited)                                                                                              60,506

                                                                                                             Year ended 30 Sep 2018    
                                                                                                                            EUR'000    
As at 1 October 2017 (audited)                                                                                               58,772    
Receipt of borrowings                                                                                                        22,250    
Disposal - loans                                                                                                           (29,064)    
Disposal - finance costs                                                                                                        472    
Capitalisation of finance costs                                                                                               (416)    
Amortisation of finance costs                                                                                                   136    
As at 30 September 2018 (audited)                                                                                            52,150 

                                                                                                          Six months to 31 Mar 2018    
                                                                                                                            EUR'000    
As at 1 October 2017 (audited)                                                                                               58,772    
Drawdown of borrowings                                                                                                       13,000    
Capitalisation of finance costs                                                                                               (204)    
Amortisation of finance costs                                                                                                    72    
                                                                                                                             71,640    
Transfer to disposal group held for sal                                                                                    (28,561)    
As at 31 March 2018 (unaudited)                                                                                              43,079    

Bank loan - Landesbank Saar                                                


The Group entered into a loan facility of EUR8.6 million with Landesbank Saar on 27 March 2019. 

The loan matures on 27 March 2024 and carries an interest rate of 1.40% plus EURIBOR 3 months per annum payable quarterly. 
An additional 25bps is applied to the margin if the LTV is between 56% and 60% or 50bps if the LTV is above 60%. The facility 
was subject to a EUR56,000 arrangement fee which is amortised over the period of the loan. The debt has an LTV covenant of 64% 
and the HIC and PIC should each be above 220% each.  

A pledge of all shares in the borrowing Group company is in place. 

10. Issued capital and reserves 
As at 31 March 2019, the Company has 133,734,686 ordinary shares in issue with a par value of 10.00 pence (no shares are held 
in Treasury). The total number of voting rights in the Company is 133,734,686. 

11. NAV per ordinary share 
The NAV per ordinary share is based on the net assets excluding non-controlling interests at 31 March 2019 of EUR182,786,000 (30 
September 2018: EUR182,069,000; 31 March 2018: EUR187,118,000) and 133,734,686 ordinary shares in issue at 31 March 2019 (30 
September 2018: 133,734,686; 31 March 2018: 133,734,686). 

12. Dividends paid 

Six months ended 31 March 2019 (unaudited)                                           Number of  Rate
                                                                                     ordinary shares          (cents)     EUR'000    
Interim dividend paid 25 January 2019                                                    133,734,686             1.85       2,474    

Six months ended 31 March 2018 (unaudited)                                           Number of  Rate
                                                                                     ordinary shares          (cents)     EUR'000
Interim dividend paid 19 January 2018                                                    133,734,686             1.50       2,006

                                                                                     Number of  Rate
Year ended 30 September 2018 (audited)                                               ordinary shares          (cents)     EUR'000                                   
Interim dividend paid on 19 January 2018                                                 133,734,686             1.50       2,006    
Interim dividend paid on 13 April 2018                                                   133,734,686             1.85       2,474    
Interim dividend paid on 20 July 2018                                                    133,734,686             1.85       2,474    
Interim dividend paid on 14 September 2018                                               133,734,686             1.85       2,474    
Total interim dividends paid                                                                                                9,428    


13. Related party transactions 
Schroder Real Estate Investment Management Limited is the Group's Investment Manager.    

The Investment Manager is entitled to a fee, together with reasonable expenses, incurred in the performance of its duties. The 
fee is payable monthly in arrears and shall be an amount equal to one twelfth of the aggregate of 1.1% of the EPRA NAV of the 
Company. The Investment Management Agreement can be terminated by either party on not less than twelve months written 
notice, such notice not to expire earlier than the third anniversary of admission, or on immediate notice in the event of certain 
breaches of its terms or the insolvency of either party. The total charge to profit and loss during the period was EUR947,000 (six 
months ended 31 March 2018: EUR849,000, year ended 30 September 2018: EUR1,958,000). At 31 March 2019, EUR140,000 was 
outstanding (six months ended 31 March 2018: EUR881,000, year ended 30 September 2018: EUR318,000).  

Directors are the only officers of the Company and there are no other key personnel. The Directors' remuneration for services to 
the Group for the six months ended 31 March 2019 was EUR72,000 (six months ended 31 March 2018: EUR62,000, year ended 30 
September 2018: EUR105,325) equivalent to GBP61,962. Each of the three directors owns 10,000 shares in the Company. 

14. Contingent liability 
There are no contingent liabilities other than those disclosed in note 7. 

15. Capital commitments 
At 31 March 2019 the Group had capital commitments of EUR821,000 (30 September 2018: EUR293,590,  
31 March 2018: EUR400,000). 

16. Post balance sheet events 
There were no post balance sheet events. 


18 June 2019
Sponsor: PSG Capital
 
Date: 18/06/2019 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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