Schroder readies £90m for ‘expected market correction’
Schroder Real Estate Investment Trust is preparing to deploy £90m into new investments, anticipating a downward turn in the market.
The news came as the firm released its results for the six months ended 30 September, with net asset value dipping by 0.6% to £354.3m and profit more than halving to £4.6m, down from £10.6m, reflecting lower valuation gains on investment properties.
Duncan Owen, global head of Schroder Real Estate, said: “The activity during the interim period leaves the company in a strong position with a low borrowing ratio and operational flexibility. There is additional investment capacity of approximately £90m ahead of an expected market correction. Selectively deploying this capital over the course of 2020 into winning cities at higher yields should mean the company is well placed to deliver continued, sustainable growth in net income.”
Schroder Real Estate Investment Trust is preparing to deploy £90m into new investments, anticipating a downward turn in the market.
The news came as the firm released its results for the six months ended 30 September, with net asset value dipping by 0.6% to £354.3m and profit more than halving to £4.6m, down from £10.6m, reflecting lower valuation gains on investment properties.
Duncan Owen, global head of Schroder Real Estate, said: “The activity during the interim period leaves the company in a strong position with a low borrowing ratio and operational flexibility. There is additional investment capacity of approximately £90m ahead of an expected market correction. Selectively deploying this capital over the course of 2020 into winning cities at higher yields should mean the company is well placed to deliver continued, sustainable growth in net income.”
Schroder focuses on locations of high urban growth with increasing property demand, or “winning cities” as it describes them. Overall, 96% of the portfolio is now located in winning cities, with increased exposure to higher performing regional offices and the industrial sector.
Lorraine Baldry, chairman of the board, added: “While the disposals of lower yielding assets will result in a temporary decline in net income prior to reinvestment, the board is comfortable with this approach as the company has approximately £90m of funding to take advantage of more attractively priced investment opportunities supporting the delivery of a fully covered, sustainable and growing dividend policy.”
During and post the six-month period, Schroder completed £45m of disposals, reflecting a 15% net premium to the valuation at the start of the period. This takes the total disposals since 1 January 2019 to £95m at an average net initial yield of 3%.
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