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Schroder European Real Estate approaching full investment

06
2017
December

Schroder European Real Estate approaching full investment – Schroder European Real Estate has announced that its EPRA NAV at the end of September 2017 was 133.6 cents per share. EPRA earnings per share for the year ended September were 5.2 cents. This translated into a 6% total return for the year. the fund is paying quarterly dividends of 1.5 cents.

The portfolio was valued on a net initial yield of 6%, up from 5.1% at the end of September 2016 (reflecting a change in the mix of properties rather than a drop in value). The portfolio was valued at €211.7m, or 7.1% higher than purchase price. Two acquisitions completed during the year taking the total portfolio to nine assets, located in eight locations across Germany, France and Spain:

  • An office building in Paris, France, for EUR30 million, reflecting a net property income yield of 9.5%; and
  • A 50% share of Metromar shopping centre in Seville, Spain, in a JV with Schroder-managed Immobilien Europa Direkt, for EUR26.2 million, reflecting a net property income yield of 6.3%
  • They say that they are in exclusive negotiations to acquire assets that, once completed, should enable the company to distribute the target 5.5% p.a. dividend against the euro issue price, fully covered by rental income.

The portfolio generates EUR14.3 million p.a. in contracted income. The average unexpired lease term is 4.4 years to first break and 6.8 years to expiry.At the end of the period the vacancy rate was 1.5%.

The loan to value at the end of the period was 25%, up from 22% a year earlier. Overall leverage is capped at 35% LTV at the time debt is drawn.

Sir Julian Berney Bt., Chairman of the Board, said: “The Company is now close to being fully invested, having executed the strategy outlined at IPO to construct a high quality portfolio of commercial real estate, which provides an attractive level of income, in the growth markets of Western Continental Europe. Economic growth in these target markets is advancing and this is having a positive impact on occupier demand and rental levels. Whilst there remains uncertainty around events such as Brexit, our strategic focus on winning cities and regions means the Company is well placed in changing market circumstances and may potentially benefit if the outcome to negotiations leads to more businesses locating and expanding in Continental Europe.”

Jeff O’Dwyer, Lead Manager for Schroder European Real Estate Investment Management Limited, added: “Our near term priority is to deploy the remaining investment capacity, which totals c. EUR30million including leverage, which will be invested in a manner consistent with the existing portfolio, in conurbations and regions that will grow faster than their domestic economies.
  “We have identified a range of potential investment opportunities that would be accretive to the Company’s earnings, which we believe provides a strong platform to grow the Company to benefit shareholders. Once fully invested we will assess our next steps, which may include a further equity raise, as we continue to see interesting investment opportunities in the market with returns accretive to earnings and performance.”

SERE : Schroder European Real Estate approaching full investment

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