The investment objective of Schroder Real Estate Investment Trust ('the Company') is to provide shareholders with an attractive level of income together with the potential for income and capital growth as a result of its investments in, and active management of, a diversified portfolio of UK commercial real estate.
|Financial Performance||Property Portfolio Performance||Portfolio||Balance Sheet||Strategy|
|Schroder Real Estate Investment Trust (‘SREIT’, ‘the Company’) had a Net Asset Value (‘NAV’) total return of +3.9% for the year to 31 March 2021
NAV total return of +3.8% for the quarter 1 January 2021 to 31 March 2021
|The Company performed better than its MSCI Benchmark in terms of its assets (real estate). The outperformance was +2.8% over one year, +2.4% per annum (‘p.a.’) over three years, and +1.1% p.a. since SREIT was first launched by Initial Public Offering (IPO) in 2004||Focused on multi-let industrial, good quality offices and retail warehousing
Accretive industrial acquisitions at average 6.8% net initial yield
Industrial is the Company’s largest sector weighting representing 39% of portfolio value
|32% net loan to value (‘LTV’) at 2.4% total cost per annum. This measures the relationship between the loan amount and the market value of the asset securing the loan. The company therefore owns more of the assets (versus the amount it has borrowed to purchase them)
£40 million of cash and undrawn debt facilities for investment
|Evolution of strategy to address acceleration in structural changes and emerging occupier trends due to pandemic|
|Further 5% dividend increase to 0.656 pence per share (‘pps’), paid in quarter ending June 2021
Targeting progressive and sustainable dividend policy
|Performance driven by 6.5% income return (MSCI 4.4%) with 7.1% reversion (MSCI 5.2%)1
80 leasing transactions totalling £7.9m2 of annual rent, reducing void to 4.8%
|Pipeline of value enhancing projects to drive income and total returns
Three Green Stars in 2020 GRESB survey and top in peer group
|The Company decided to buy back some of its own shares as they were selling at a lower price than the value of the assets3
£9.5 million shares repurchased delivering 1.3 pps of accretion to shareholders
Acquired at an average discount of -41% to March 2020 NAV
|Reduction in Investment Manager’s fees to generate saving of approximately £600,000 per annum with effect from 1 July 2021|
|Discrete Yearly Performance (%)||12 months to Mar-2021||12 months to Mar-2020||12 months to Mar-2019||12 months to Mar-2018||12 months to Mar-2017|
|Net Asset Value total return2||3.9||-9.4||4.5||10.5||7.2|
|SREIT Real Estate Total Return3||4.6||1.9||7.2||11.8||8.5|
|MSCI UK Balanced Monthly and Quarterly Funds Quarterly Property Index3||1.8||0.0||4.8||10.3||4.7|
Nick Montgomery is Head of UK Investment and Executive Director at Schroder Real Estate. He joined Schroders in January 2012 from Invista Real Estate Investment Management where he was Head of UK Commercial Funds. Previously Nick worked at Gatehouse Investment Management. He started his investment management career in 1999 at LaSalle Investment Management managing institutional pension fund property portfolios. Nick holds a BSc (Hons) in Estate Surveying from Nottingham Trent University. He is a member of the Royal Institution of Chartered Surveyors.
The investment policy of the Company is to own a diversified portfolio of UK property with good fundamental characteristics, as outlined below. The Company invests principally in the UK commercial property sectors including office, retail, and industrial and will also invest in other sectors including mixed use, residential, hotels, healthcare and leisure.
Diversification and asset allocation
The Board believes that, in order to maximise the stability of the Company's income, the optimal strategy is to invest in a portfolio of assets diversified by location, sector, asset size and tenant exposure with low vacancy rates and creditworthy tenants. The value of any individual asset at the date of its acquisition must not exceed 15% of gross assets and the proportion of rental income deriving from a single tenant must not exceed 10%.
The Board has established a gearing guideline for the Investment Manager, which seeks to target debt, net of cash, at a level reflecting a loan to value of between 25-35%.
Interest rate exposure
The Board's policy is to hedge interest rate risk, either by ensuring the borrowings are on a fixed rate basis, or through the use of interest rate swaps/derivatives used solely for hedging purpose.
Investments in real estate are relatively illiquid and more difficult to realise than equities or bonds.
Yields may vary and are not guaranteed.
The use of gearing is likely to lead to volatility in the Net Asset Value ("NAV") meaning that a relatively small movement either down or up in the value of the Company's total assets will result in a magnified movement in the same direction of that NAV.
There is no guarantee that the market price of shares in a UK Real Estate Investment Trust such as SREIT will fully reflect their underlying NAV.
The value of real estate is a matter of a valuer's opinion rather than fact.
This UK Real Estate Investment Trust should be considered only as part of a balanced portfolio, of which it should not form a disproportionate part.