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Fully invested and on target Schroder European REIT ready for next step

By Paul Norman - Tuesday, June 12, 2018 9:37

Schroder European Real Estate Investment Trust said it had delivered growth in net asset value, net income and it the annualised dividend rate stated at IPO in half year results for the six months ended 31 March 2018.

Schroders European REIT's update comes as the company is now fully invested with it said 100% of the portfolio by value located in the faster GDP growth locations in Europe that it sets its stall out to buy in to. 

The REIT has set itself apart by being uniquely a London listed REIT focused purely on Continental European real estate markets.

Profit for the six months increased 157% to €10.8m (31 March 2017: €4.2m), driven by an uplift in portfolio values and growth in net income.

There was a NAV total return of 6.1% and a 4.9% increase in NAV to €187.1m.

EPRA earnings were €6.5m (31 March 2017: €2.6m), reflecting it said the growth in rental income from acquisitions and receipt of €2.4m of the surrender premium for an asset in Hamburg.

The annualised dividend rate of 5.5% based on the euro equivalent of the issue price as at admission has achieved the target dividend stated at IPO.

The loan to value has moved up slightly to 28% (30 September 2017: 22%). The debt has a weighted average total interest rate of 1.3%, is either fixed cost or capped and has a duration of 6.4 years on average

The company is now fully invested following the acquisition of a data centre and office premises in the Netherlands for a price of €19.8m, reflecting a net initial yield of 10%

It said it continues focus on "winning cities and regions with 100% of the portfolio by value located in the faster GDP growth locations in Europe", using Oxford Economics as its key source.

The portfolio is valued at €237.3m, reflecting an uplift of approximately 9.5% on the combined purchase price.

Portfolio occupancy is 97% and there is an unexpired lease term of 6.7 years to expiry.

Looking forward it said the Eurozone growth continues to drive a strong occupational market and low vacancy rates are supporting favourable rental growth across the majority of markets it invests in.

In a statement Sir Julian Berney Bt., Chairman of the Board, said: “This has been an active period for the Company, during which we have delivered growth in NAV, net income and shareholder dividends. We have executed on the strategy outlined at IPO, constructing a high quality real estate portfolio, across the growth cities of western continental Europe. Leveraging its local expertise, Schroders is working on a number of asset management initiatives across the portfolio to grow income and value and coupled with the positive economic backdrop in our target markets, we believe the company is well positioned for the next stage of growth.”

Jeff O’Dwyer, of Schroder Real Estate Investment Management Limited, added: “Our portfolio of assets across winning cities such as Berlin, Hamburg, Stuttgart, Frankfurt and Paris continues to benefit from improving occupational demand and strong investment markets. Combined with the active asset management initiatives that we have been driving, this has generated positive performance.

“Our immediate priority is to invest the capital that we are receiving from the profitable sale of the two Casino supermarket investments and we are in negotiations on a number of new opportunities in both new and existing sectors. As previously stated, our aspirations are to grow the portfolio through a disciplined and consistent approach centred on enhancing income and shareholder returns.”

Speaking to CoStar News O'Dwyer said: "We will only raise more capital subject to shareholder value where we can match a portfolio to these metrics. But the investors want this to be larger and we have a mutual desire to grow this for the benefits of diversification, cost economies of scale and liquidity."

"We are huge believers in Berlin and Hamburg and the Nordic countries, in terms of growth. Stockholm, Madrid, Helsinki and Amsterdam Munich and Berlin stick out as growth opportunities while we are satisfied with our allocation in Paris. It would have to be really attractive to us to go to Italy at present. There is a general sense we are not seeing the pricing that takes about of the risk."

O'Dwyer said the present investment strategy focused on, as promised diversifying by investing the capital from its casinos disposal into light industrial and logistics.

"Another positive point is although we have taken on leasing risk in Hamburg deliberately we are seeing some good interest in terms of this space already."

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