June 20 2024 16:00
Schroder European Real Estate Investment Trust (Sereit) saw its earnings climb to €4.3m in the six months to end-March 2024, compared with €3.8m in the six months to end-March 2023, primarily because of rental growth offsetting the effect of higher interest costs.
Two quarterly dividends of 1.48 euro cents per share were declared, bringing the total dividend relating to the period to 2.96 euro cents per share, which was 109% covered by earnings.
Houten Inventum industrial park, the Netherlan
A net asset value (NAV) of €165.3m was achieved, or 123.6 cents per share, compared with €171.4m or 128.2 cents per share at the end of September 2023; largely driven by continued outward yield movement of the company’s underlying portfolio. Sereit owns assets across what it calls growth cities in Western European countries such as Spain, Germany and France.
The group’s balance sheet was strengthened as all near-term refinancing was completed. No further debt would expire until June 2026 and the average interest cost on this debt was 3.2%. The group’s loan-to-value ratio was low as 24%, net of cash. The company had €26m of available cash, which would provide flexibility.
The company’s property portfolio was independently valued €208.1m, 3.1% lower than six months ago. As much as 96% of the portfolio was occupied with around 50 tenants. As much as 100% of rent due was collected.
Jeff O’Dwyer, Fund Manager for Schroder Real Estate Investment Management said his team was considering making a number of acquisitions during the rest of 2024.
“I think we are in a strong position and can expand our portfolio. As interest rates have started to fall in Europe, we find ourselves at an inflexion point from which we can perform well. Also by advancing the ongoing sustainability and net zero audits, the asset management team has identified a variety of initiatives that can help improve operational efficiencies, while reducing occupancy costs and greenhouse gas emissions,” he said.
Tim Leckie, an analyst at Panmure Gordon, said Sereit’s results were pleasing.
“The investment case is further bolstered by the attractive dividend yield circa 400 basis points premium over UK glits. Our MTSE yield of 9.0% demonstrates strong coverage. Adding to this is excellent asset coveragevof the current share price40% discount to reported NAV. Sereit does exactly what a income focused fubd or value add vehicle should do, give access to excellent yield based total returns. We see the shares as overly discounted at current levels,” he said.
“Sereit gives investors a portal to invest in Western European commercial real estate, offering attractive cash based sustainable earnings at the current share price with a MTSE yield of 9.0% with growth in sustainable earnings over our forecast period of 1.7%. However, the real value is in the active management utilising the broader Schroders local real estate platforms, allowing strategies beyond what might be typically achievable at such a fund size,” he said.
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