Schroder REIT updates on performance – Schroder Real Estate Investment Trust has reported a marginal drop in NAV in the quarter to 30 June 2019. The unaudited NAV was £355.7m or 68.6 pence per share (pps), a decrease of 0.15% per share compared with the NAV at the end of March. It did, however, report a positive NAV total return, including the dividend paid of 0.65 pps, of 0.8%.
Dividend payment
The company announced an interim dividend of 0.65 pps for the quarter that will be paid on 16 August 2019 to shareholders on the register as at 2 August 2019. The dividend will be designated 0.35 pps as an interim property income distribution and 0.30 pps as an interim ordinary dividend.
Portfolio update
The valuation of its 43-asset property portfolio stands at £461.1m and produces an annual rent of £26.8m, reflecting a net initial yield of 5.4%.
As at 30 June 2019 the void rate was 8%, calculated as a percentage of rental value. The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, is 6.1 years.
During the quarter, the company continued its strategy to sell lower yielding assets and to realise gains from asset management. In May, it exchanged contracts to sell a warehouse let to Booker in Acton for £18.9m, reflecting a yield of 3.5%, and above its book value at 31 March 2019 of £17.2m. This year it has completed or unconditionally exchanged contracts to sell five assets for £68.9m, reflecting a net initial yield of 3.1%.
These disposals, combined with the recently extended, but undrawn, revolving credit facility, provides the company with balance sheet of almost £100m.
Asset management initiatives
In Leeds, Schroder REIT completed three lettings at the Millshaw Industrial Estate generating £291,000 a year, while works in connection with the conversion of a 31,000 sq ft warehouse to a JD Sports Gym will complete in June. This will trigger completion of a new 10 year lease, without tenant break, at a rent of £204,750 a year. The positive letting activity has seen the value of the asset increase by 4.3% over the quarter to £33m.
In Peterborough, the company has exchanged contracts to let a 81,121 sq ft distribution warehouse on Southgate Way to EPD Insulation at a 83% uplift in rent from the previous tenant. The letting is due to complete in August following ongoing refurbishment works costing approximately £480,000 and has resulted in a 26% increase in the value of the property.
During the quarter Schroder REIT also let a prime retail unit at Eastgates, in Leicester, to Tim Hortons on a 10 year lease at £95,000 a year. The letting is subject to planning and a landlord capital contribution of £80,000.
Debt
The company has two loan facilities, a £129.6m term loan with Canada Life and a £52.5m revolving credit facility (RCF) with Royal Bank of Scotland. As at 30 June 2019, the full Canada Life facility and £29m of the RCF was drawn with an average duration of approximately eight years and an average interest cost of 4.2%.
Since the quarter end the RCF has been fully repaid. Following this repayment the company has cash of £27.7m and unsecured property with a value of £36.5m. This results in a loan to value ratio, net of cash, of approximately 22%.
SREI : Schroder REIT updates on performance