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SCHRODER EUROPEAN REAL ESTATE INVESTMENT TRUST PLC - Schroder European REIT Agrees New Lease, Refurbishment And Forward Sale Of A Paris Office Asset For c. 104 Million

Release Date: 01/10/2020 08:00
Code(s): SCD     PDF:  
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Schroder European REIT Agrees New Lease, Refurbishment And Forward Sale Of A Paris Office Asset For c. €104 Million

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

1 October 2020

SCHRODER EUROPEAN REIT AGREES NEW LEASE, REFURBISHMENT AND FORWARD SALE OF A PARIS OFFICE ASSET FOR c. €104 MILLION

Schroder European Real Estate Investment Trust plc ("SERE" or the "Company"), the company
investing in European growth cities, has exchanged contracts to sell its Boulogne-Billancourt office
asset in Paris for approximately €104 million, subject to programme and cost. This significant
transaction will:

    •   Deliver a profit, post all acquisition and development costs, of approximately €28 million,
        representing a net profit of c. 35%, subject to programme and cost;
    •   Significantly strengthen the balance sheet and Net Asset Value (“NAV”) of the Company;
    •   Provide additional funds for reinvestment and earnings enhancing initiatives.

The sale is structured as a forward funding, with the building being handed over to the purchaser in
H1 2022, following completion of a comprehensive refurbishment which is being undertaken by the
Company. The refurbishment and sale follows the agreement of a new 10-year pre-let contract with
existing tenant Alten in June this year. The rental uplift is 39% higher than the previous rent paid.

The final sale price of approximately €104 million will deliver net sale proceeds of approximately €70
million when completed, after deducting the c. €30 million cost of refurbishing and re-letting the
building. This represents a profit on cost of c. 35%. The sale proceeds will be received in stages and
the Company expects the NAV to increase incrementally as sale receipts occur. 50% of the price is to
be received on exchange of the definitive deed prior to this calendar year end 2020, with the
remainder payable in installments over the subsequent 18 months as construction is completed. The
overall increase to the most recent published NAV as at 30 June 2020 is expected to be approximately
15%, subject to programme and cost.

The building was originally acquired in 2016 for €37.5 million with the Company identifying an
opportunity to create significant value by undertaking a major repositioning of the asset whilst taking
advantage of the rapidly improving market dynamics in the Boulogne-Billancourt sub-market of Paris.
The transaction reflects the Company’s ability to add value through active management of
investments acquired in winning high growth locations.

The net sale proceeds strengthen the Company’s balance sheet, providing significant operational and
financial flexibility. The funds will primarily be redeployed into new earnings enhancing initiatives
including new investments.

Sir Julian Berney, Chairman of the Board commented: “This is a transformational transaction, which
will be highly accretive to shareholder returns. It is a strong endorsement of the Company’s strategy,
to identify real estate where we can create significant value for shareholders through asset
management, benefiting from our team’s local expertise inside the key markets.

“Our focus continues to be on driving the performance of the existing portfolio. This will provide a
clear path to income growth and improving long-term shareholder returns and the Company’s rating.”

Enquiries:

Jeff O’Dwyer / Duncan Owen
Schroder Real Estate Investment Management Limited             Tel: 020 7658 6000

Ria Vavakis
Schroder Investment Management Limited                         Tel: 020 7658 2371

Dido Laurimore/Richard Gotla/Methuselah Tanyanyiwa
FTI Consulting                                                 Tel: 020 3727 1000

This announcement contains inside information.

JSE Sponsor
PSG Capital

Date: 01-10-2020 08:00:00
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