Schroder REIT increases NAV by 25%

Schroder REIT has increased its net asset value by 25% over the year to £372m and committed to be net zero by 2040. Announcing its full-year results to the end of March 2022, the REIT said it had increased EPR earnings by 35% to £15.7m, pulled in an IFRS profit of £89.4m, up from last year’s £4.5m, and made a NAV return of 31%. Chair Lorraine Baldry said: “Capital values increased strongly in the financial year and the company benefitted from an above-average weighting to multi-let industrial estates, retail warehousing and offices in higher-growth cities.” The total value of the 42-property portfolio, including joint ventures, stands at £523.5m, up from £439m the previous year, with rental income of £30m. The REIT has also narrowed its trading discount to NAV, which is now 23.7% as opposed to last year’s 34%. Fund manager Nick Montgomery said: “These strong results are the outcome of disciplined investment decisions and active management of the portfolio. Conviction in our strategy has resulted in a good-quality, diversified portfolio that is weighted towards higher-growth parts of the UK real estate market with opportunities to add value through asset repositioning and development.” However, Baldry warned of “increased levels of volatility” owing to the “speed and force of the upturn in inflation”. “We expect this to lead to slowing capital values, but do not currently expect a significant correction,” she said, pointing out that the sector had “historically acted as a partial hedge against periods of high inflation”. SREIT said the portfolio was well positioned for rising interest rates, with an above-average income yield, a pipeline of asset management initiatives that should support returns, and long-term, fixed-rate debt. The convergence of returns between the main sectors should enable the company to demonstrate the benefits of owning a diversified portfolio, with the ability and expertise to invest across all sectors, it said. Net zero strategy Schroder REIT has also launched a pathway to net zero strategy, vowing that all new developments will be net zero by 2030, with operational and embodied carbon from both landlord and tenant reaching net zero by 2040. Montgomery said: “Focusing on sustainability throughout the real estate lifecycle 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.” Baldry added: “There is now a growing consensus that there is a meaningful rental and value premium for buildings with green certifications, and the company has integrated sustainability considerations at all stages of the investment process and asset lifecycle.” SREIT has proposed a further 3% increase in the quarterly dividend to 0.795p per share, to be paid in the quarter ending 30 June 2022. Baldry said: “There is scope for further dividend increases given the reversionary potential of the portfolio and a growing pipeline of development opportunities, refurbishment projects and other income-generating activity.” Baldry confirmed that she will be retiring as chair in July 2022 after taking up the post in 2014. Alastair Hughes, the current senior independent director, will succeed her as chair. To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews Photo from gov.co.uk