Schroder Real Estate Investment Trust Limited, the actively managed UK focused REIT, today announces its final results for the year ended 31 March 2023.

High income return and a sector leading debt profile underpinning earnings and a further dividend increase

  • Net asset value (‘NAV’) decreased to £300.7 million or 61.5 pps (31 March 2022: £372.2 million, or 75.8 pps), with equivalent yield expansion of 152 bps to 7.8% (MSCI Benchmark: 123 bps to 6.2%) as a result of the higher interest rate environment, partially offset by ERV growth of 9.2% (MSCI Benchmark: 3.4%)
  • 14% increase in dividends paid during the financial year to £15.8 million, or 3.22 pps (31 March 2022: £13.9 million, or 2.83 pps), fully covered by EPRA earnings
  • NAV total return -15.1% (31 March 2022: 30.9%)
  • Long debt maturity profile of 10.6 years and a low average interest cost of 2.9%, with 90% either fixed or hedged against movements in interest rates
  • Loan to value, net of all cash, of 36.0% (31 March 2022: 28.6%)
  • Change of independent valuer at the financial year end
  • 12 month total return from the underlying portfolio of -7.9% compared with the MSCI Benchmark at -13.5%
  • Further 2% increase in the quarterly dividend to 0.836 pps for the quarter ended 31 March 2023, to be paid in June

Asset management and transactional activity leading to long term outperformance against the MSCI Benchmark, strong rental value growth and an improvement in defensive qualities

  • Sustained, long term outperformance of the underlying portfolio with a total return of 6.0% per annum on a rolling three year basis (MSCI Benchmark Index: 1.9% per annum)
  • 65 new lettings, rent reviews and renewals across 973,000 sq ft completed since the start of the financial year, totalling £6.7 million in annualised rental income and generating £2.3 million per annum of additional rent, including:
    • Rent reviews and lease renewals at Langley Park Industrial Estate in Chippenham with Siemens Mobility and IXYS which increased the headline annual rent by £0.4 million or 21% 
    • 40,000 sq ft lease regear completed with Buckinghamshire New University in Uxbridge, extending the lease contract by five years at 13% higher rent
    • Post year end completion of Stanley Green Trading Estate 80,000 sq ft operational net zero development in Manchester, with approximately 40% of the £1.3 million ERV let or in legals
  • Acquisition of St. Ann’s House, a mixed-use office and retail asset in Manchester City Centre, for £14.7 million, reflecting a net initial yield of 7.8%, a reversionary yield of 9.1% and a low average capital value of £283 per sq ft, and, post year end, a small adjoining ownership in Chelmsford, for £800,000, reflecting a net initial yield of 11.1%
  • Three disposals totalling £12.6 million at a 13% average premium to the valuation at the start of the financial year

Strong progress improving sustainability performance as future strategy evolves

  • Further improvement in the Company’s Global Real Estate Sustainability Benchmark (‘GRESB’) score, placing first amongst a group comprising seven diversified REITs
  • 58% of the portfolio A-C rated (31March 2022: 41%), the Company‘s first ‘A+’ ratings were achieved at the new development at Stanley Green Trading Estate post year end
  • Announced ‘Pathway to Net Zero Carbon’, includes operational whole buildings emissions to be aligned to a 1.5°C pathway by 2030

Alastair Hughes, Chair of the Board, commented: “There are signs that real estate values are stabilising, and approaching fair value. The attractive portfolio income and pipeline of asset management activity should contribute to continued earnings and dividend growth, further improve the defensive qualities of the portfolio, and enhance returns as the market recovers.

“Whilst a relaxation in monetary policy is expected in 2024, interest rates will remain elevated compared with the recent past. The prudent balance sheet management implemented by the Company, resulting in the lowest cost, longest duration debt in the peer group, largely removes this risk to earnings, and provides a solid foundation to deliver future dividend growth.”

Nick Montgomery, Fund Manager, added: “Whilst the Company’s asset values were impacted by macro-economic headwinds, our diversified portfolio delivered a further increase in the fully covered dividend level, driven by asset management-led rental growth. Importantly, the strength of our balance sheet, underpinned by low cost, long-term, fixed rate debt, is a key competitive advantage and provides significant protection from the impact of higher interest rates. These factors, combined with an increasing emphasis on sustainability-led initiatives, will further and more clearly differentiate the Company’s strategy, helping to drive more sustainable, long-term returns for shareholders.”