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.
Overview of interim results to 30 September 2021, including post period end industrial acquisition
|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 +11.3% for the six months to 30 September 2021
NAV total return of +5.7% for the quarter to 30 September 2021
|The Company performed better than its MSCI Benchmark in terms of its assets (real estate). The outperformance was +1.1% over six months, +2.9% 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||Accretive industrial acquisition post period end at average 6.9% Net Initial Yield
Following this acquisition, industrial weighting increases to 44%2 of portfolio value
86%2 of the portfolio weighted to the industrial, office and retail warehouse sectors following post period end activity
|34%2 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)
Following post period end industrial acquisition, c. £20 million of cash and undrawn debt facilities for investment2
|ESG leadership with an integrated and relevant ESG strategy
Increase exposure to larger assets with strong fundamentals in higher growth locations
Operational excellence and hospitality mindset
Maintain a strong balance sheet with a LTV between the long term target range of 25% to 35%
|Further 7.5% dividend increase to 0.726 pence per share (‘pps’), paid in quarter ending December 2021
Continued progressive and sustainable dividend policy
|50 new lettings, renewals and reviews since 1 April 2021 which generated £2.4 million p.a. of rental income and increased contracted rental income by £800,000 p.a.
Sustained outperformance of the real estate portfolio with a total return of 8.9% over the period versus the MSCI Benchmark Index of 7.71
|Received planning at Stanley Green for the development of an 80,000 sq ft operationally Net Zero Carbon scheme – the first to achieve this status in the North West
Three Green Stars in 2021 GRESB survey and second 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
Buyback over the 6 month period to 30 September 2021 acquired at an average discount of 33% to March 2021 NAV
|Reduction in Investment Manager’s fees to generate saving of approximately £650,000 per annum with effect from 1 July 2021|
|12 months to Sep-2021||12 months to Sep-2020||12 months to Sep-2019||12 months to Sep-2018||12 months to Sep-2017|
|Net Asset Value total return2||18.3||-4.7||2.8||8.9||11.8|
|SREIT Real Estate Total Return3||14.3||-1.1||5.4||11.0||12.2|
|MSCI UK Balanced Monthly and Quarterly Funds Quarterly Property Index3||11.1||-2.5||2.5||8.5||9.8|
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 real estate underpinned by good fundamental characteristics. The Group invests principally in the industrial, office and retail sectors and will also consider other sectors including mixed-use, residential, hotels, healthcare and leisure.
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.