Schroder Real Estate invests in 'winning cities and towns'

Schroder Real Estate Investment Trust, has successfully repositioned its portfolio with 91% now located in ‘winning cities and towns’ ranked in the first and second quartiles for projected UK GDP growth.

Global Head Duncan Owen said: “The investment themes underpinning the strategy continue to focus on winning cities and towns with a competitive advantage in terms of higher levels of GDP, employment and population growth; well developed infrastructure; and places where people want to live as well as work.”

Capital expenditure increased by £5.5m in the first half, which the company believe should deliver higher future returns and improve the portfolio’s defensive characteristics.

For the six months ended 30 September 2016, the group’s Net Asset Value (NAV) fell to £316.8m from £322.6m in March 2016.

The trust’s portfolio returned +1.8% over the period compared with -1.1% from the MSCI Benchmark Index, placing the portfolio on the 9th percentile.

European public real estate association (EPRA) earnings per share increased by 10% to 1.3p.

Loan to value, net of all cash, remains stable at 30% which is within the long term target range of 25% to 35%.

The group has also disposed of five smaller non-core secondary retail assets worth £13.7m during and since the period end reflecting an average net initial yield of 3.9% and 2.2% premium to valuation at the start of period.

Refurbishments of vacant assets in Bristol and Cardiff are near completion leading to a portfolio rental value of £34.1m per annum, reflecting a reversionary yield of 7.6% over the benchmark of 6.1%.

Letting transactions totaled at 35 during and since the period including 23 post Brexit.

Looking forward Chairman Lorraine Baldry said: “With forecasts now pointing to a period of lower returns from UK commercial real estate, the Company's focus is on increasing earnings further and reducing risk, whilst ensuring it remains in a position to capitalise on any market correction. For that reason the Board and Manager will continue to consider disciplined and accretive growth where equity can be deployed to enhance income and total returns.”

The share price fell 0.10% to 2,903p at 1315 GMT.