Schroder Real Estate Investment Trust Limited, the actively managed UK focussed REIT, today announces its unaudited interim results for the six month period ended 30 September 2022.

Low cost, long-term debt profile supporting earnings growth and further dividend increase

  • Net Asset Value (‘NAV’) of £366.0 million or 74.8 pps (31 March 2022: £372.2 million, or 75.8 pps)
  • EPRA earnings increased 3.6% to £8.6 million (30 September 2021: £8.3 million)
  • Dividends paid during the period increased 20% to £7.8 million, or 1.60 pps, reflecting dividend cover of 110% based on EPRA earnings
  • Positive NAV total return performance of 0.8%, reflecting a strong income return from the underlying portfolio of 2.8% vs. 1.9% for the MSCI Benchmark Index (the ‘Benchmark’), led by active asset management
  • Long term debt maturity profile of 11.2 years at an average interest cost of 2.7%, with 91% of drawn debt fixed rate or capped
  • Loan to value, net of all cash, of 31.4% (31 March 2022: 28.6%)
  • Continued total return outperformance of the underlying portfolio of 1.8% vs 1.2% for the Benchmark
  • 1,969,725 shares acquired for £1.0 million as part of the Company’s share buyback programme

Portfolio outperformance driven by recent higher yielding acquisitions, a disposal ahead of book value and active asset management

  • Acquisition of St. Ann’s House, a mixed-use office and retail asset in Manchester City Centre, for £14.7 million, reflecting a net initial yield of 7.8%, a reversionary yield of 9.1% and a low average capital value of £283 per sq ft
  • Disposal of a single let industrial asset at Southlink, Portsmouth for £6.5 million, reflecting a net initial yield of 3.2% and a 33% premium to the independent valuation as at 31 March 2022
  • 33 new lettings, rent reviews and renewals completed since the start of the period totalling £5.1 million in annualised rental income and generating £1.9 million per annum of additional rent above the previous level, including:
    • Lease agreements completed at Langley Park Industrial Estate in Chippenham and the Haywood House office in Cardiff totalling 280,000 sq ft
    • 40,000 sq ft lease regear completed post period end with Buckinghamshire New University in Uxbridge, extending the lease contract by five years at 13% higher rent
  • Rent collection rates remain high with 99% collected for the quarter ended 30 September 2022

Increased focus on sustainability as a defining characteristic of future strategy

  • Further improvement in the Global Real Estate Sustainability Benchmark (‘GRESB’) score, placing the Company first amongst a peer group comprising seven diversified REITs
  • Development of 80,000 sq ft, operational Net Zero Carbon industrial scheme at Stanley Green, Manchester on track to complete in Q1 2023, with strong occupier interest generated, further net zero industrial developments in progress
  • Company announced its ‘Pathway to Net Zero Carbon’, includes operational whole buildings emissions to be aligned to a 1.5°C pathway by 2030

Alistair Hughes, Chairman of the Board, commented: “The Company’s portfolio is well positioned for this more challenging environment, with high exposure to sectors and locations experiencing stronger occupational demand, a granular and resilient tenant base, an above-average income yield and a near term pipeline of asset management initiatives to support returns. Crucially, we have a long-term, fixed-rate debt profile, with no near-term maturities, which positions us favourably and gives us additional confidence against the uncertain backdrop. Having increased the dividend earlier this year ahead of the pre-pandemic level, we expect the dividend to remain fully covered for the current financial year.”

Nick Montgomery, Fund Manager, added: “Despite a volatile and uncertain economic backdrop, good progress has been achieved over the period delivering on the strategy, resulting in a positive NAV total return, sustained outperformance of the underlying portfolio and a further increase in the dividend level, which is fully covered. Whilst a rising cost of capital will continue to put downward pressure on real estate values and a recession will challenge businesses, our diversified, higher yielding portfolio, robust occupier mix and strong balance sheet should support continued income growth against the volatile and uncertain backdrop.”