Investing in commercial property, where demand for quality space still outweighs supply, paid off handsomely for Schroder Real Estate Investment Trust (SREI) in the year to March. Total return on the underlying property portfolio came to 12.8 per cent, compared with 11.1 per cent for the MSCI Benchmark Index. Headline profits were lower, reflecting fewer asset sales and a slightly lower valuation uplift.
Even so, the property portfolio including joint ventures grew by 21 per cent to £463m, while annualised rental income was up 11 per cent at £28.2m. That’s without a significant reversionary element, whereby if all rents were marked to market, rental income would be £34.7m.
The company continued to recycle assets to fund new investment. Five smaller, lower-yielding assets were sold for £15.2m, giving an average yield of 3.4 per cent and 15 per cent above the previous year-end valuation, and an industrial estate in Leeds and a retail park in Bradford were acquired for £54.5m, representing an initial yield of 6.8 per cent.
Schroder continued to grow its exposure to larger assets in high growth areas, and nearly three-quarters of the portfolio is now located in towns and cities that are ranked in the top quartile for forecast UK GDP growth.
| SCHRODER REAL ESTATE INVESTMENT TRUST (SREI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 58p | MARKET VALUE: | £301m | |
| TOUCH: | 57.5-58p | 12-MONTH HIGH: | 62p | LOW: 55p |
| DIVIDEND YIELD: | 4.3% | TRADING PROPERTIES: | nil | |
| DISCOUNT TO NAV: | 7% | |||
| INVESTMENT PROP: | £449m* | NET DEBT: | 42% | |
| Year to 31 Mar | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 50.6 | 12.1 | 3.1 | 3.52 |
| 2013 | 45.1 | -10.8 | -3.0 | 3.52 |
| 2014 | 48.6 | 20.9 | 5.7 | 2.74 |
| 2015 | 57.7 | 55.1 | 11.3 | 2.48 |
| 2016 | 62.2 | 36.3 | 7.0 | 2.48** |
| % change | +8 | -34 | -38 | - |
Ex-div:- Payment:- *Includes joint ventures **Dividends paid quarterly, fourth quarter dividend of 0.62p paid on 31 May | ||||
