NAV and Dividend for the quarter to 30 June 2022

For release 27 July 2022

Schroder Real Estate Investment Trust Limited

('SREIT' or the 'Company')

ANNOUNCEMENT OF NAV AND DIVIDEND FOR THE QUARTER TO 30 JUNE 2022

Schroder Real Estate Investment Trust Limited ('SREIT' or the 'Company'), the actively managed UK-focused REIT, announced its net asset value ('NAV') and dividend for the quarter to 30 June 2022 at 7.00 am. The Company has been made aware that some investors are having difficulty accessing this, which can be found at https://www.londonstockexchange.com/news-article/SREI/nav-and-dividend-for-quarter-to-30-june-2022/15557698.

The full text of the announcement is shown below:

Schroder Real Estate Investment Trust Limited ('SREIT' or the 'Company'), the actively managed UK-focused REIT, announces its net asset value ('NAV') and dividend for the quarter to 30 June 2022.

Highlights

·      NAV increased by 4.4% to £388.6 million (31 March 2022: £372.2 million) and the NAV total return was 5.4%.

·      Dividend paid during the quarter of 0.795 pps, fully covered by recurring earnings, with a further 1% increase in the quarterly dividend to 0.803 pence per share ('pps'), payable on 19 August.

·      Net loan to value of 29.0%, with an average interest cost of 2.7%, an average loan duration of 11 years and no debt maturities until 2027.

·      Acquired St. Ann's House in Manchester, a mixed-use office and retail asset, for £14.7 million reflecting a net initial yield of 7.8%.

·      Disposed of a single let industrial asset at Southlink, Portsmouth for £6.5 million, reflecting a net initial yield of 3.5% and a 33% premium above the independent valuation as at 31 March 2022.

·      High volume of portfolio activity with 22 letting transactions completed across 468,760 sq ft totalling rent of £3.2 million per annum, reflecting an uplift of £1.5 million per annum compared to the previous position.

·      Continued outperformance vs. MSCI Benchmark Index over three months, 12 months, three years and since inception in 2004 (based on latest available Benchmark data to 31 March 2022).

·      Announced recommencement of the share buyback programme.

Nick Montgomery, Fund Manager of SREIT, commented: "This strong performance is testament to continued asset management successes, notably at our regional multi-let industrial estates and retail warehouse assets. Whilst the outlook is increasingly uncertain due to high inflation and an expectation that interest rates will continue to rise, the Company is well positioned due to its good quality, higher yielding portfolio and long-term, fixed-rate debt."

Net asset value

The unaudited NAV as at 30 June 2022 was £388.6 million or 79.1 pps. This reflects an increase of 4.4% compared with the NAV as at 31 March 2022. Taking into account the quarterly dividend of 0.795 pps paid in June 2022, the NAV total return for the quarter was 5.4%. A breakdown is set out below:

Dividend payment

The Company announces an interim dividend of 0.803 pps for the period 1 April 2022 to 30 June 2022.

This reflects a 1% increase compared with the prior quarter dividend, and compares with 0.772 pps paid immediately prior to the Covid-19 pandemic in December 2019. The dividend will continue to be reviewed by the Board targeting a sustainable and progressive dividend policy.

The dividend payment will be made on 19 August 2022 to shareholders on the register at the record date of 5 August 2022. The ex-dividend date will be 4 August 2022.

The dividend of 0.803 pps will be wholly designated as an interim property income distribution ('PID').

Property portfolio (MSCI Benchmark data as at 31 March 2022)

As at 30 June 2022, the underlying portfolio comprised 42 properties valued at £549.6 million. At the same date the portfolio produced a rent of £30.8 million per annum reflecting a net initial yield of 5.2%, which compares with the Benchmark of 3.9%. The portfolio estimated rental value ("ERV") is £35.3 million per annum, reflecting a reversionary yield of 6.4%, which compares with the Benchmark of 4.6%.

As at 30 June 2022, the void rate was 8.4% calculated as a percentage of ERV. Combining the impact of leases representing 0.9% of ERV which have completed post quarter end, and a further 0.6% which is under offer, the void rate would fall to 6.9%. The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, is 5.4 years. The tables below summarise portfolio information as at 30 June 2022:

* Latest MSCI Benchmark data as at 31 March 2022.

Portfolio activity

Since 31 March 2022, the Company has completed 22 new lettings, renewals and reviews across 468,760 sq ft of space. These transactions generate £3.2 million per annum of contracted rent, which represents an additional £1.5 million per annum of rental income compared to the previous position.

Transactions

As previously reported, in May 2022 the Company acquired St. Ann's House in Manchester, a city centre mixed-use office and retail asset 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.  At acquisition the mixed-use office and retail asset generated £1.22 million per annum of headline rent compared with an ERV assessed by the independent valuer of £1.33 million.

Balance sheet and debt

As at 30 June 2022, the Company had cash of £16.4 million, including its share of Joint Venture cash balances, and a loan to value ratio, net of cash, of 29.0%.

The Company has two loan facilities, a £129.6 million term loan with Canada Life and a £75.0 million revolving credit facility ('RCF') with Royal Bank of Scotland International ('RBSI'). As at 30 June 2022, £46.3 million of the RCF was drawn.

50% of the Canada Life facility matures in October 2032 with the balance in October 2039, at an average fixed interest rate of 2.5%.

The RBSI facility matures on 6 June 2027 and £30.5 million of the £46.3 million drawn has an interest rate cap that results in a maximum interest rate, including the margin of 1.65%, of 3.15%. The cap expires in July 2023.

Sustainability

As announced in our annual results, we are evolving our strategy to focus on sustainability and Environmental, Social and Governance ('ESG') considerations more generally, throughout the real estate life cycle. This leverages the strengths of Schroders, will deliver enhanced long-term returns for shareholders as well as have a positive impact on the environment and the communities where the Company is investing.

Buyback programme

As a result of the strong financial position outlined above, the Board and Manager believe that investment in the Company's shares at the prevailing price and discount to NAV offers attractive value for its shareholders. As a result, the Company has today separately announced that it intends to recommence its share buyback programme.

This follows the share buy back programme last undertaken by the Company between September 2020 and April 2021, when 27,433,108 shares were acquired for £9.7 million. This reflected an average price of 35 pence per share ('pps') and an average discount to the net asset value as at 30 September 2020 of 40%.

Board changes

As previously announced, Lorraine Baldry, Chair of the Company since January 2014, retired with effect from 26 July. The Board and Manager thank Lorraine for her significant contribution during this period. Alastair Hughes, Senior Independent Non-Executive Director, replaces Lorraine as Chair with effect from 26 July. As previously announced, Priscilla Davies was appointed Senior Independent Non-Executive Director of the Company on 7 June 2022.

-ENDS-

For further information:

About Schroder Real Estate Investment Trust Limited

Schroder Real Estate Investment Trust Limited aims 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.

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 warehouse sectors and will also consider other sectors including mixed-use, residential, hotels, healthcare and leisure.

The Company leverages Schroders' specialist capabilities across strategies, with a strong team of 95 in the UK. SREIT employs a hospitality-driven approach to improve the operational performance of its assets, underpinned by a fully integrated ESG strategy, in order to deliver superior shareholder returns.