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Schroder European Real Estate Investment Trust
Full Year Results Presentation – YE September 2018
Jeff O’Dwyer: SEREIT Manager
Andrew MacDonald: Head of Real Estate Finance 3 December 2018
Laurent Dubos: Deputy Head of investment, France For professional investors and advisers only.
This material is not suitable for retail clients
Contents page 01 Highlights 02 Portfolio and asset management 03 Markets 04 Financial review 05 Summary 1
Highlights
The Continental European growth city strategy
Acquisitions and asset management support dividend and profit growth
Investment Finance European markets Growth strategy
• New investments – c.€52m of • EPRA earnings grown 57% to • Markets: Broad based economic Dividend: Achieved IPO target of
new investments in the €10.8m, driven by investment recovery: 5.5% on Euro IPO issue price2
Netherlands and France take the and asset management - GDP / sentiment above trend
Pipeline: Remaining investment
portfolio to c. €222m1 activity - Employment increasing capacity of c.€15m from proceeds
• Diversified portfolio into high • NAV of €182.1m, resulting in - Voids falling of sale of Casino supermarkets
growth logistics sector NAV total return of 7.5% - Rents increasing
Accretive growth: Grow portfolio
• Profitable sale of two lower • Fully covered dividend in
- Price growth continues
through earnings enhancing
yielding retail investments at a respect of the year of 7.4 - Modest development pipeline acquisitions
10% premium to Dec 2017 value cents p.s., equating to annual • Megatrends: Urbanisation,
yield c.5.7% on current GBP Scale benefits: Improves
• 100% of portfolio located in infrastructure, demographic diversification, liquidity and cost
share price3 change
higher growth locations economies
• 26% LTV at interest cost of • Market presence: Deep local
• Occupancy over 97%, 6.6 yrs 1.4% and duration of c. 6.0
lease length market knowledge and access of
years Schroder European teams
• 17 new lettings / re-gears
achieved across c. 8,600 sqm and
€3.9m lease surrender premium
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get
back the amounts originally invested.
Source: Schroders, December 2018 1Portfolio market value is based on 30 September 2018. 2Yield based on IPO issue price in Euro 3Based on share price of £1.15 p.s. and GBP:EUR FX Rate
of 1.10
3
Portfolio and asset management
Portfolio evolution
Invested €222m1 across 12 assets in France, Germany, Spain and Neth.
Berlin, Germany Stuttgart, Germany Frankfurt, Germany Seville, Spain Rumilly, France
Retail Warehouse Office Retail Retail Logistics
Jan 2016
2018
€0 €222m1
Paris, France Hamburg, Germany St. Cloud, Paris, Apeldoorn, Utrecht, Houten &
Office Office France Netherlands Venray, Netherlands
Office Data centre / mixed use Logistics
Source: Schroders, December 2018. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
1Portfolio market value is based on 30 September 2018 and acquisition price of new investments
5
Select transactions over the period
Sale of retail and deployment into warehouse sector
Rennes & Biarritz, French retail sale
Sale Price 10% premium to last independent valuation
Location Casino hypermarkets in Rennes and Biarritz, France
• Purchase in June 2016 of two grocery anchored retail investments at a net initial
yield of 5%
Description • JV partner (Casino Group) exercised purchase option at a strike price reflecting a
10% premium to last independent valuation
• Casino Group under pressure due to financial structure / rumoured merger
Strategy Re-deploy proceeds into higher yielding investments that enhance diversification
Rumilly, French logistic purchase
Purchase Price c. €8.6m / €514 psm / 7% NIY
Locations Rumilly – located c. 1.5 hours drive east of Lyon and 1 hour south of Geneva
• One of the fastest growing regions in France (5 year GDP 2.5% p.a vs 1.8%
national average)
• Strategic location in the land-scarce French Alps, close to the Swiss border
Description • Built-to-suit asset enjoying excellent tenancy history, fully let to Cereal Partners
France (Nestlé subsidiary) for the past 24 years with three lease extensions
• Constructed in three stages: 1994, 2003 and 2010
• Long term (c.7.5 years WAULT) with an attractive NIY of 7.0%
Strategy Re-gear lease
6 Source: Schroders, December 2018.
Select transactions over the period
Sale of retail and deployment into warehousing
Venray, Netherlands logistic purchase
Purchase Price €9.5m / €621 psm / 6% NIY
Location Part of the established Venlo-Venray logistics cluster
• Venlo/Venray is one of Europe’s strongest industrial locations with excellent
infrastructure connectivity, making it a strategic location for European distribution
• Located in the established Smakterheide industrial estate. Other companies in the
Description immediate area include Geodis, XPO, Xerox, Herbalife, VidaXL
• Functional warehouse (9.5m clear, good dock provision, sprinkler) leased at
sustainable rents.
• Inflation linked long term 10 year lease to 3PL specialist DKL
Strategy Indexed long term income play leased at affordable / sustainable rents
Houten, Netherlands logistic purchase
Purchase Price €7.2m / €790 psm / 7% NIY
Location The largest business park in Houten – c.15 minutes drive from Utrecht
• Regarded as the premier business park in Houten with close proximity to
Utrecht, making it a versatile location for multiple business uses
• Modern building constructed in 2010
Description
• Inflation linked long term lease of 8 years. Reversion upside
• Strong tenant specialising in ventilation heat pumps, boiler systems and water
heater appliances with 110+ year history
Strategy HQ premises providing secure, long term income with scope to expand
7 Source: Schroders, December 2018.
2017/18 asset management
Successful delivery enhancing occupancy and rental income
Asset management initiatives
• Re-gearing of c.25% of the office area with the merging of Fila
Paris, Assistance and Garantie Assistance. Revised lease reflects a 4/6/9 year
Saint Cloud Office
France term at an annual rent 13% above ERV
• Completion of the renovation of lift lobbies (Q3 2018)
Boulogne- Paris, • New lease for communications antenna on a 12 year term
Office
Billancourt France • Continued discussions with Alten regarding long term commitment
Hamburg, • Conclusion of a €3.9m lease surrender premium with City BKK,
City Sud Office
Germany representing 4.7 years of annual rent
• Removed under-performing restaurant and added a new burger
specialist
Seville, • Commencement of €800,000 scope of works that will improve centres
Metromar Retail
Spain signage, wayfaring, lighting and general vibrancy
• Finalised new lease with leisure specialist Urban Planet on an
historically non income producing space totalling 1,200 sqm
• Disposal of two retail assets at a price that represented a 10%
Rennes &
premium to last independent valuation
Transactions Retail Biarritz,
• Re-deploy proceeds into higher yielding investments of a warehouse
France
nature that extend weighted unexpired lease term
Source: Schroders, December 2018. 2017/18 is year end September 2018. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
8
Asset management strategy
SEREIT has identified short, medium and long-term initiatives
2018 2021 2022 2022/23 2025+
Improved centres signage, Alten expiry – target re- Re-development potential Stuttgart to benefit from 2025 expiry of initial term
wayfaring, lighting and gear prior (6,861 sqm) at at Boulogne Billancourt improved infrastructure at Hornbach, Berlin - 4
vibrancy at Metromar due Boulogne Billancourt from the completion of hectare site with alternate
Q1 2019. Tender awarded ‘Stuttgarter 21’ use potential
Lease surrender premium Grand Paris Transport
regarding City BKK in improvements St Cloud,
Hamburg (5,468 sqm) Paris
completed, c.40% in
advanced discussions
Refurbishment program for
lift lobbies at St Cloud
completed end Q3 2018
Completion of key lettings –
Urban Planet and ex.
Massimo Dutti at Metromar
St Cloud (Paris) – re-gearing / transport Metromar – improving vibrancy / tenancy mix Hamburg – City BKK lease surrender Berlin – 4 hectares in growth corridor
Source: Schroders, December 2018. Forecast risk warning: Please see the information slide at the end of this presentation.
9Portfolio overview
Twelve institutional grade assets located in target growth markets
Country allocation (Value)
12%
39%
18%
31%
France Germany
Netherlands Spain
Sector allocation (Value)
9%
13%
49%
29%
Office Retail Industrial Mixed
10 Schroders, November 2018. Data per 30/09/2018Management of breaks and lease expiries Asset business plans being executed Lease expiry to earliest termination 11 Schroders, November 2018. Data per 30/09/2018
Continental European investment
Senior team overseeing real estate platform of over 140 people
Duncan Owen
Global Head of Real Estate
Mark Callender Andrew MacDonald
Jeff O’Dwyer Robin Hubbard
Head of Real Estate Head of Real Estate
Pan European Fund Manager Head of Real Estate Capital
Research Finance
Benelux
France Germany Switzerland Nordics
Thomas Guyot Nils Heetmeyer Roger Hennig Eva Granlund Laurent Dubos
Local Asset Management Teams
Offices Retail Industrial Hotel
Support from legal, accounting, operations, risk and client servicing teams based
in London, Jersey and Luxembourg
Source: Schroders, December 2018.
12Near-term Pipeline
Investing capital and targeting growth
Purchase
Opportunity Country Sector Yield Profile Comment
Price
27,000 sqm facility let to two tenants specialised
Paris - south Paris Sth in logistics and transportation services. Located
€17.3m
1 Logistics 5.8% Core
region, France (€640/sqm) in an established industrial area 30km south of
Status: Bid submitted
Paris.
Sale and leaseback opportunity for two
Brittany Brittany, buildings located in an established logistics area
€17.6m
2 Logistics 5.7% Core
France (€740/sqm) in northern Brittany. Total of 24,000 sqm with a
Status: Bid submitted
WAULT of 12 years let to a strong tenant.
Industrial asset located in an industrial area
Lille - south Lille Sth,
€10.4m Value between Arras and Lille. Leased to a strong
3 Dourges, Logistics 7.0%
(€440/sqm) Add tenant with a WAULT of 9 years. Longer term re-
Status: Under review France
development
Total €45.3m
13 Source: Schroders, November 2018Markets
Focus on growth – cities not countries
Major cities and regions forecast to enjoy faster economic growth
Average GDP Growth 2019-2023, % pa
3.0
2.5
2.0
1.5
1.0
0.5
Belgium
Zurich
Stockholm
Finland
Amsterdam
Apeldoorn
France
Dusseldorf
UK
Madrid
Netherlands
Munich
Frankfurt
Stuttgart
Cologne
Milan
London
Oslo
Spain
Toulouse
Bordeaux
Barcelona
Gothenburg
Norway
Lyon
Hamburg
Geneva
Germany
Rome
Italy
Brussels
Denmark
Sweden
Sevilla
Utrecht
Berlin
Copenhagen
Marseille
Paris
Manchester
Helsinki
Switzerland
Source: Oxford Economics, Schroders. October 2018. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
The forecast should be regarded as illustrative of trends. Actual figures will differ from forecasts. Please refer to Important Information regarding forecastsExposure to higher GDP growth, winning centres
SEREIT portfolio located in highest growth regions of Western Europe
SEREIT’s Investment Universe SEREIT’s portfolio vs. Investment Universe
Outer ring shows SEREITs
direct exposure as a
% of value
20%
6%
20%
Inner ring
shows 46%
average for
investment
universe
31%
80%
Fastest Growing Regions
Second Quartile
Third Quartile
Slowest Growing Regions
Source: Oxford Economics, Schroders. November 2018 -Total of 12 assets and exposure calculated on investment volume. Investment universe consisting of 844 NUTS3 regions in countries
shown on map. Data based on Oxford Economics’ GDP growth forecasts end-2017–end 2022 as at September 2018.
16European market fundamentals remain supportive
Key highlights
Economic Sentiment in the EU & Eurozone Take-up, 12m rolling Totals, ‘000 sq m
100 = long-term average
120 12,000 Growth remains above trend
115 Sweden
110 10,000
105 Iberia
100 8,000 Economic sentiment high
95 BeNeLux
90 6,000
despite global volatility
85 Italy
80 4,000 UK and Ireland Unemployment falling –
75
70 EU28 Eurozone 2,000 France
65
strong growth in office
60 0 Germany employment, increasing
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
consumer spending
Office completions & net additions
Supply level moderate with
ILO-Unemployment rates (%) Office completions, million sq m Net-Additions (% of Stock) low vacancy
14.0 7 3.5
Forecast Forecast
Germany
12.0 6 3.0 Ongoing positive rental
France
growth forecasts
5 2.5
10.0 Italy
4 2.0 Inflation moderate despite
8.0 Spain
oil prices
3 1.5
Benelux
6.0
2 1.0 Nordic
No threat from extreme
4.0
1 0.5
levels of debt
Net Additions (lhs)
2.0 0 0.0 Yields low – but rational
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
Germany France Italy
Netherlands Sweden
Source: European Commission, Oxford Economics, JLL, PMA, Schroders. November 2018
Note forecasts should be regarded as illustrative of trends. Actual figures will differ from forecasts. See Important Information regarding forecasts
17Financial review
Financial highlights for year to 30 Sept 2018
Investment and asset management driving shareholder returns
EPRA earnings grown by 57% to €10.8m
– Driven by growth in rental income and Hamburg surrender premium
IFRS profit increased by 28% to €13.2m
– Realised €1.9m profit from sale of Casino supermarkets in France
NAV total return of 7.5%
– Supported by 3.2% capital return and 7.5% income return from the portfolio
Quarterly dividend of 1.85 cents p.a., achieving the IPO dividend target of a 5.5% yield on Euro IPO issue price
– Total dividends declared in respect of year of 7.4 cents p.s., representing 42% increase on prior year
– Dividend 109% covered from EPRA earnings
Overall LTV of 26% at a weighted average interest rate of 1.4% and a weighted duration of c. 6 years
Approximately €15m - €20m of remaining reinvestment capacity (including debt)
Past performance is not a guide to future performance and may not be repeated.
Source: Schroders, December 2018
19NAV movement for 12 months to 30 Sept 2018
7.5% NAV Total Return
NAV as at 1 October 2017 178.3 133.3
Total of €48.2m of acquisitions, including Rumilly, Netherlands
Transaction costs of investments (3.7) (2.8)
logistics and Apeldoorn
Largest contributor was St. Cloud, Paris where the value increased by
Unrealised gain in real estate valuation 3.7 2.8
€1.5m from lease re-gearing and strengthening market
Sale of Casino supermarkets, reflecting the net sale price of €44.8m
Realised gain on property disposals 4.0 3.0
vs Sept 2017 valuation
Capital Expenditure (0.6) (0.4) Capex at Seville and St. Cloud
Includes €2.0m positive impact on net income from receipt of part
EPRA earnings 10.8 8.1 of the surrender premium at the Hamburg asset
Underlying EPRA earnings increased as portfolio has grown
Amortisation of finance costs, change in fair value of interest rate
Non-cash / capital items (1.0) (0.7)
cap, deferred tax etc
Dividends paid during the year were €2.0m in respect of Jul – Sept
2017 and €2.5m in respect of the other three quarters to the end
Dividends paid (9.4) (7.1)
of June 2018. Dividend in respect of Jul-Sept 2018 of €2.5m will be
paid in Jan 2019
NAV as at 30 September 2018 182.1 136.2
Source: Schroders and www.xe.com. Numbers based on proportionally consolidated basis and therefore represent SEREITs share of joint ventures.
20Income statement for FY 2018
Acquisitions and asset management driving income growth
12 mths to 12 mths to
30 Sept 2018 (€m) 30 Sept 2017 (€m)
Net rental and related income 14.1 11.4
Hamburg Surrender Premium 2.4 -
Total Fees and Expenses (3.7) (3.6)
Net finance costs (1.1) (0.8)
Taxes (0.9) (0.1)
Underlying EPRA earnings 10.8 6.9
EPRA earnings bridge
£’million
2.0 0.8 10.8
12
10 1.4 0.2 0.1
1.4
8 6.9
6
4
2
0
2017 EPRA Net income Full year Lost income Rental Hamburg Taxes (inc. 2018 EPRA
Earnings from new income from from sales growth - Surrender - surrender Earnings
acquisitions 2017 existing net income premium)
in 2018 acquisitions assets impact
Source: Schroders, December2018. Numbers based on proportionally consolidated basis and therefore represent SEREITs share of joint ventures
For illustrative purposes only and should not be viewed as a recommendation to buy or sell. Past performance is not a guide to future performance and may not be repeatedSummary balance sheet and investment capacity
€220m+ investment portfolio with low leverage
As at 30 Sept 2018 (€m) As at 30 Sept 2017 (€m)
Investment properties 221.6 211.6
Cash1 26.9 27.2
External third-party loans (64.4) (60.4)
Net current liabilities (2.0) (0.1)
NAV 182.1 178.3
NAV per share €/£2 €1.362 / £1.21 €1.333 / £1.18
– Remaining investment capacity of c.€15 - €20m Total funds including debt
– Allocated against assets in exclusivity 12%
– Assumes equity for new acquisitions of c.€6m and additional
gearing of c.€9m - €14m
– Would take gearing to target range of 30% - 35% LTV and
88%
take advantage of accretive borrowing rates
– Remaining cash balance is allocated against capex and other Invested Available
corporate uses
Source: Schroders. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
Numbers based on proportionally consolidated basis and therefore represent SEREITs share of joint ventures.
1 Cash shown includes receipt of HSBC loan proceeds, which are classified as other receivables in the financial accounts as the money was in transition
2 FX rate of £1 : €1.129 as at 30 September 2018 (FX Rate: 30 Sept 2017 £ : €1.134) Source:www.xe.com.
22Achieved IPO dividend target
Growth in income supported increase in dividend
Growth in declared dividend per share
€ cents p.s.
8.0 7.4
7.0
6.0 5.2
5.0
4.0
3.0 1.7
2.0
1.0
0.0
FY 2016 FY 2017 FY 2018
– Annual dividend grown 42% to 7.4 Euro cents per share in respect of FY 2018
– IPO target achieved - Represents annualised Euro dividend yield of 5.5% on Euro equivalent IPO issue price1
– Converted at Eur:GBP FX rate as at 30 Sept 2018, dividend equates to annualised 6.6% yield on GBP IPO issue price of 100
pps
– Dividend cover of 109% based on EPRA earnings
– Dividend policy based on sustainable income
Source: Schroders, Dec 2018. 1Yield based on Euro equivalent of the issue price as at admission. This is a target only, based on a number of assumptions that may not materialise. There can be no guarantee that this target will be met.
23Debt financing
Current borrowing rates accretive to income returns
Loans summary as at 30 Sept 2018 Loans by maturity New Loans in FY 2018
Loan Interest
Loan LTV Maturity
Amount Rate
Hamburg/Stuttg 19%
€14.0m 48% June 2023 0.85% 37%
art
Frankfurt /
€16.5m 46% June 2026 1.31%
Berlin
44%
Dutch Logistics €9.25m 45% Sept 2023 2.15% Lender HSBC Lender BRED
Banque
Seville €11.7m 45% May 2024 1.76% Populaire
2023 2024 2026 Loan €9.25m Loan €13.0m
St. Cloud €13.0m 38% Dec 2024 1.30%
Total €64.4m 26%1 6.0 Years 1.40% Interest 2.15% Interest 1.30%
Rate Rate
Maturity 5 Years Maturity 7 Years
Debt Strategy
– Portfolio gearing capped at 35% LTV; loans targeted against assets where
most accretive and may be up to 50% LTV
– 100% of interest rate exposure either fixed or capped; borrowing rates
expected to remain low in Europe
– Nine of the twelve assets have gearing against them; Rumilly logistics, Paris
BB office and the Apeldoorn office are currently ungeared
– Likely to draw further debt against future acquisitions, taking gearing
towards 30% - 35% LTV, in-line with target
1. LTV based on GAV of overall company. Source: Schroders, December 2018.
24The Company investing in European growth cities Delivering investment performance; Well positioned for future growth – High quality c. €222m portfolio 100% located in growth cities and regions across France, Germany, Netherlands and Spain – Strong income profile with over 97% occupancy and long term leases – Investment and asset management activities and strong market have delivered growth in profits – Identified programme of near-term and longer term initiatives to deliver further capital value and rental growth – Annualised Euro dividend yield grown to 5.5% p.a. based on IPO issue price, driven by growth in net income – Low cost, long duration debt financing at 26% LTV – accretive to income return – Robust Eurozone economic backdrop; low unemployment and positive economic confidence – Investor and occupier activity in target markets remains strong; high rental growth – Megatrends (e.g. urbanisation, infrastructure investment) support long-term focus on growth cities – Identified pipeline of assets for reinvestment of remaining sale proceeds of c.€15m – Strong growth ambitions, with associated benefits such as diversification and liquidity Source: Schroders, December 2018 25
Appendix
Labour markets continue to recover
Unemployment falling – strong growth in office employment
Office employment: Forecast growth in absolute ILO-Unemployment rates (%)
employment between end-2018 to end-2023
Luxembourg 14.0
Stockholm
Dublin
Berlin
Prague 12.0
Oslo
Cologne
Hamburg
Frankfurt
Madrid 10.0
Copenhagen
Munich
Amsterdam
London: WE
Lyon 8.0
Stuttgart
Dusseldorf
Lille
Paris 6.0
Vienna
Lisbon
Brussels
Milan
Barcelona 4.0
Helsinki
Rotterdam
Birmingham
Edinburgh
Manchester 2.0
London: City
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Rome
0.0% 2.5% 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% Germany France Italy Netherlands Sweden
Source: PMA, Oxford Economics, Schroders. November 2018. The forecast should be regarded as illustrative of trends. Actual figures will differ from forecasts. Please see the information
slide at the end of this presentation. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.European occupier activity remains high
Broad based occupier demand
Take-up, 12m tolling Totals, ‘000 sq m
12,000
11,000
10,000 Sweden
9,000
Iberia
8,000
BeNeLux
7,000
6,000 Italy
5,000
UK and Ireland
4,000
France
3,000
2,000 Germany
1,000
0
Source: JLL, Schroders. October 2018. Country figures based on major markets. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.Office development remains subdued
Building activity supportive of rental growth
Office completions, Net-Additions (% of Stock)
million square metres
7 3.5
Forecast
6 3.0
5 2.5
4 2.0
3 1.5
2 1.0
1 0.5
0 0.0
2011
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Germany France Italy Spain Benelux Nordic Net Additions (lhs)
Source: PMA, Schroders. October 2018. Net-Additions for Europe ex. UK . Country figures based on major markets. Note forecasts should be regarded as illustrative of trends. Actual
figures will differ from forecasts. See Important Information regarding forecasts. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
29Office vacancy is at historic low in a number of markets
Modern Grade A space often extremely scarce
Office Vacancy Rates Q3’18 compared to 10Y High/Low Office Vacancy Rates Q2’18 – Overall market &
% Grade A
20 14
18
12
Vacancy as % of overall stock Q2 ‘18
16
14 10
12
8
10
8 6
6
4
4
2 2
0
Madrid
Berlin
Barcelona
Helsinki
Munich
Hamburg
Lyon
Edinburgh
Amsterdam
Paris
The Hague
Utrecht
Dusseldorf
Birmingham
Rotterdam
London WE
London City
Luxembourg
Manchester
Brussels
Rome
Milan
Stockholm
Frankfurt/M
0
Madrid
Utrecht
Berlin
Dublin
Hamburg
Birmingham
Dusseldorf
Barcelona
The Hague
Amsterdam
Lyon*
London City
Edinburgh
London WE
Munich
Brussels
Paris*
Luxembourg
Milan
Frankfurt/M
Rotterdam
Manchester
Peak last 10Y Trough last 10Y Q3'18 Vacancy Rate Grade A Vacancy Rate
Source: JLL, Schroders. August/October2018 *Paris & Lyon – Vacancy in newly completed stock.
For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
30Tenant overview
Over 90 tenants and weighted average lease term of 6.6 years
Rent % of Total Wault Brk Wault Exp
# Tenant Property
(€m) Portfolio (yrs) (yrs)
1 KPN B.V. Apeldoorn 2.4 15% 8.3 8.3
2 Alten Paris (B-B) 2.4 15% 2.5 2.5
3 Hornbach Berlin 1.6 10% 7.3 7.3
4 Filassistance Paris (SC) 0.8 5% 3.3 8.3
5 Cereal Partners France Rumilly 0.7 4% 6.6 7.6
6 LandBW Stuttgart 0.7 4% 7.4 7.8
7 DKL B.V. Venray 0.7 4% 10.0 10.0
8 Thesee Paris (SC) 0.6 4% 0.9 3.9
9 Inventum Industrial Houten 0.6 4% 7.7 7.7
10 Ethypharm Paris (SC) 0.5 3% 2.7 8.3
Total top ten tenants 10.9 68% 5.7 6.6
Remaining tenants 5.2 32% 3.3 6.4
Total 16.1 100% 5.0 6.6
31 Schroders, November 2018. Data per 30/09/2018SEREIT portfolio
Paris office investment – Boulogne Billancourt
Opportunity Fully let office building with reversionary potential
Location Jean Jaurès 221, 92100 Boulogne Billancourt (Paris), France
Tenure Freehold – co-ownership
Asset Established market in Paris’ Western Crescent
Description Good location within Boulogne-Billancourt
Metro line 9 and Paris ring road nearby
Built in 1989, flexible T-shaped floor plates (ca. 800 sqm)
100%-let to ALTEN, a technology consulting and engineering
company until 31 March 2021
WAULT 2.6 years (from 1/10/2018)
Purchase price €37.5m / NIY 5.7% / €5,522 psm
Current Value €42.0m as at 30 September 2018
Investment Medium duration lease term with a strong covenant tenant
Rationale present in the building since 1998 – provides time to consider
refurbishment
Conservative rent level (€312 / ‘office’ sqm/pa) offering a good
alternative to La Défense in a more attractive environment
Area where people live and work; supply constrained
Boulogne-Billancourt is an established market (1.2m sqm of office
stock, the second largest market in the Western Crescent) with
average take-up over 100,000 sqm/pa
Potential to create value and significant reversion potential (c.
30%) by redeveloping the property at lease expiry
Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
32SEREIT portfolio
Berlin retail warehouse investment – Mariendorf
Opportunity Long let retail warehouse in a growing Berlin region
Location Großebeerenstraße 30, 12107 Berlin, Germany
Tenure Freehold
Asset DIY retail unit in Mariendorf, 10 km south of Berlin City Centre
Description Asset comprises 3 parts: a DIY unit, a garden centre and a trade counter,
let to Hornbach, with a total lettable area of 16,800 sqm
Urban location, surrounded by medium density residential and
commercial accommodation. A separately owned Aldi supermarket
adjoins the site; small potential residential site within ownership
Large site of over 4 hectares
Let to Hornbach Baumarkt AG until 2026
WAULT 7.3 years (from 1/10/2018) and 7.3 years to break
Purchase price €24.25m / NIY 6.2% / €1,443 psm
Current Value €26.2m as at 30 September 2018
Investment Characteristics consistent with our house view of targeting institutional
Rationale grade real estate in growth cities
Hornbach Baumarkt is the one of the strongest DIY operators in Germany;
sector has witnessed some consolidation
Long income stream in defensive segment at an attractive cash yield
Land value is relatively high (c. 20-30% of value) underpinning residual
value
Potential for residential conversion in the long run
Small residential site at the rear; opportunity to redevelop
Exploring potential to acquire Aldi supermarket alongside
33 Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.SEREIT portfolio
Hamburg office investment
Opportunity Fully let, multi tenanted office property on the edge Hamburg CBD
Location Hammerbrookstraße 94, 20097 Hamburg, Germany
Tenure Freehold
Asset Core office investment in Hamburg’s Centre South office sub-market.
Description This area continues to improve through new retail, residential and
office development; mixed use location
Good micro location, alongside public transport and main arterial
roads. Hammerbrook S-Bahn station (lines S3 & S31) located within
250m, one stop to central station
Varied office sub-market, catering for private and public sector
occupiers. Increasingly become a back office location; rents at 50%
discount to CBD
Modern asset built in 2005. Ground floor retail with strong
convenience offer with office space above
WAULT 2.5 years (from 1/10/2018) and 2.5 years to break
Purchase price €14.4m / NIY 6.9% / €2,063 psm
Current Value €16.3m as at 30 September 2018
Investment Sub market is improving and increasingly becoming a place where
Rationale people want to live and work
Highly liquid lot size that appeals to both institutional and private
investors
High yielding investment with favourable unexpired lease term and
an acquisition price in line with replacement cost
Opportunity to re-gear head lease with BKK
Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
34SEREIT portfolio
Stuttgart office investment
Opportunity Fully let, core office investment anchored by Government tenant
Location Neckarstrasse 121, 70190 Stuttgart, Germany
Tenure Freehold
Asset Description Core office investment centrally located in Stuttgart, the political,
economic and cultural centre of Baden-Württemberg, Germany’s third
largest state by population
Strong micro location close to central station and Schlossgarten park.
The sub-market has a range of government occupiers including various
courts of justice and ministries
Originally constructed in 1960 and comprehensively refurbished in 2005
with a total lettable area of 5,832 sqm and parking for 71 cars
Efficient floor plate of c. 750 sqm, divisible in two for either cellular or
open-plan offices. Good specification.
Currently 100% occupied with the main tenant being the Federal State of
Baden-Württemberg (81%) with a lease expiry in July 2026
WAULT 7.1 years (from 1/10/2018) and 6.8 years to break
Purchase price €14.4m / NIY 5.0% / €2,478 psm
Current Value €15.9m as at 30 September 2018
Investment Characteristics consistent with our house view of targeting institutional
Rationale grade real estate in growth cities
Stuttgart is one of Germany’s top 7 office markets; very low vacancy
Excellent covenant strength providing long term, secure cash yield
Highly liquid lot size that appeals to both institutional and private
investors
Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
35SEREIT portfolio
Frankfurt retail investment
Opportunity Multi let convenience retail centre anchored by Lidl supermarket,
located in a growing urban area of Frankfurt am Main
Location Lorscher Straße 41, 60489 Frankfurt/Rödelheim, Germany
Tenure Freehold
Asset Fully let, multi tenanedt convenience retail centre located in
Description Rödelheim; a growing suburb of Frankfurt am Main with good
transport connections and visibility to main highway
Built 2004 and modernised in 2015 to a high specification
4,525 sqm total rental space with more than 350 parking spaces.
1,600 sqm Lidl supermarket is considered to be the ideal size for
new style convenience/small basket retailing
All retail units have dedicated, secure delivery areas
Site area 8,097 sqm
WAULT 5.8 years (from 1/10/2018) and 5.8 years to break
Purchase price €11.05m / NIY 5.6% / €2,478 psm
Current Value €11.45m as at 30 September 2018
Investment Well located, high quality building, catering for demand for
Rationale grocery/convenience stores from locals and commuters
Fully let with opportunity to change tenant mix and increase rental
income over the medium term
Income underpinned by c.11 year unexpired lease term with main
tenant Lidl
Plan to introduce drug store to improve footfall
Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
36SEREIT portfolio
Paris office investment - Saint Cloud
Opportunity Best premises in a large office complex at an extremely attractive price
Location Saint-Cloud, an upscale suburban city bordering Paris
Tenure / Built Freehold in a co-ownership / Built in the 1970s, well maintained since
Asset Description Ca. 15,800 sqm of office and storage areas located in ‘Les Bureaux de la
Colline’, a well maintained 65,000-sqm office complex; Paris
Entire building E and the four highest floors in building D i.e. the best
premises in the complex: located near the main entrance with the best
views of Paris and over Parc de Saint-Cloud;
Office area 100% let to 12 tenants with very high historical occupancy
ratio (> 90%) at a defensive average rent of €215/sqm/year, but with high
service charges;
Office floor areas range from 700 to 1,500 sqm;
Very good accessibility to the property by car (A13 in front of the
building) and good accessibility using public transport (tramway, metro
and bus stations nearby). Premises includes 303 car spaces
WAULT 6.0 years (from 1/10/2018) and 2.2 years to break
Purchase price c. €30m i.e. €1,959/sqm and 9.5% NIY
Current Value €35.5m as at 30 September 2018
Investment Acquisition at a discount to conservative estimate of intrinsic / long term
Rationale value given special situation (sale before year end)
5 largest tenants of good covenant account for 70%+ of rental income;
Largest shareholding stake in the co-ownership by far (22.4%).
Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
37SEREIT portfolio
Metromar shopping centre, Seville
Opportunity Spanish recovery play via the acquisition of a dominant urban shopping
centre located in one of the fastest growing and most affluent suburbs of
Seville, Spain’s fourth largest city
Location Located in the south western Seville suburb of Mairena del Aljarafe. The
Central Seville
centre benefits from easy car access and is well serviced by public transport
with frontage to the only line that services this part of Seville with the city
centre, making the area a key growth corridor
Tenure / Built Freehold. Constructed in 2006 and acquired by UBS for €104m in 2007
Asset Description Urban shopping centre totalling 23,506 sqm servicing a catchment of
250,000 people within 15 minutes
Strong tenant mix centred on grocery, fashion (50%) and leisure.
Recognised as the fashion destination for its catchment and surrounding
towns. Key fashion brands include H&M, Mango and the majority of
Inditex brands (Zara, Bershka et al)
Strong like for like sales growth; +8% in 2015 and +4% in 2016 and a
annual footfall of c. 4 million. Reasonable rent/TO ratios
Good income diversification with over 50 occupiers
2,787 sqm of vacancy providing for upside potential
WAULT 8.7 years (from 1/10/2018) and 3.0 years to break
Purchase price €25.5m and 6.2% NIY (50% interest)
Current Value €26.0m as at 30 September 2018
Investment Spain is in its early stages of recovery. Retail is expected to be a key
Rationale beneficiary of improved economic and consumer sentiment
Established and dominant centre within its trade area offering scope for
income growth potential
38 Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.SEREIT portfolio
Data centre / office investment, Netherlands
Opportunity Opportunity to acquire a freehold office / data centre in Apeldoorn (NL),
fully leased to KPN till Dec ‘26, the largest telecom/IT service provider in
the Netherlands. Attractive yield and purchase price at a significant
discount to replacement cost
A-50
Location Apeldoorn (pop. c. 160k) is located in the centre of the Netherlands with
good infrastructure links to both the north/south (via the A-50) and the
east/west (via the A-1). Amsterdam is within an hour drive. The city is an Apeldoorn
important ICT employment centres in the Netherlands, catering for over
6,500 jobs in the sector and growing
Tenure / Built Freehold – Constructed in stages between 1975-85. Renovated 2006, 2016
A-1
Asset Description 23,700sqm of GLA (56% office, 22% dataroom, 23% storage) across
four floors + basement.
Site area of 35,731sqm with 495 on site parking spaces (1:48sqm)
Strategic location for KPN – 1 of 10 locations for key data centres
Average rent of €101/sqm – discount to Apeldoorn prime
WAULT 8.3 years (from 1/10/2018) and 8.3 years to break
Purchase price €19.8m / 9.9% NIY and €835/sqm
Current Value €20.0m as at 30 September 2018
Investment Attractive inflation linked 9 year income stream, strong covenant
Rationale Good location: central Netherlands and at the intersection of the A-1
and A-50, with strong alternate use potential
Apeldoorn expected to be a beneficiary of the trend of the relocation
of back-office functions (particularly ITC) to secondary cities (rents
currently stand at c. 30% of Amsterdam rents)
39 Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and not a recommendation to buy or sellSEREIT portfolio
Rumilly logistics investment
Opportunity Opportunity to invest in a warehouse in Rumilly (French Alps), an area well-
situated with close proximity to Lyon and Geneva
Location Logistics platform located in Rumilly (Haute-Savoie), close to Annecy in the
French Alps. The asset is close to A41 towards Geneva, to A6 towards Paris
and to A43 towards Lyon. Rumilly can be reached by the railway network
and the highway network (Chambery airport, Lyon Airport and Geneva in
less than one hour). Rumilly
Tenure / Built Freehold – Constructed in three stages: 1994, 2003 and 2010
Asset Description 16,700 sqm (97% warehouse, 3% office) with 22 loading docks, 14 truck
and 28 car parking spaces
Built-to-suit asset enjoying excellent tenancy history, fully let to Cereal
Partners France (Nestlé subsidiary) for the past 24 years with three
extensions
Rent in line with market
WAULT 7.6 years (from 1/10/2018) and 6.6 years to break
Purchase price €8.5m / 7.0% NIY and €514/sqm
Current value €8.6m as at 30 September 2018
Investment Scarcity in land plot, meaning strong interest for occupiers and
Rationale distributors
Strong credit tenant (Nestlé subsidiary)
Long term hold with a favourable cash yield / Attractive NIY of 7.0%
Accretive to SEREIT distribution profile and adds further diversification
benefits
Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
40SEREIT portfolio
Houten logistics investment
Opportunity An industrial investment located in an established mixed use area of
Houten
Location Located in the de Meerpaal business park 2km south west of Houten and
13km south of Utrecht city centre. The area has good accessibility by car
and public transport with close proximity to the A27 and A12 motorways. A
bus stop is located 2 minutes walking distance from the property.
Houten
Utrecht
Tenure / Built Freehold – 2010
Asset Description 9,149 sqm of GLA (80% warehouse, 20% office)
Site area of 12,100 sqm with 120 parking spaces and 2 loading docks
Modern building constructed in 2010 with clear height of 12 m
Strong tenant specialising in ventilation heat pumps, boiler systems and
water heater appliances with 110+ year history
Rent in line with market
WAULT 7.8 years (from 1/10/2018) and 7.8 years to break
Purchase price €7.2m / c. 7.0% NIY and €790/sqm
Current value €7.4m as at 30 September 2018
Investment Strong industrial asset within de Meerpaal, the largest business park in
Rationale Houten
Attractive inflation linked 8 year income stream, leased to a strong
covenant
Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
41SEREIT portfolio
Venray logistics investment
Opportunity Invest in a light industrial asset in one of the largest logistics regions of the
Netherlands
Location Located in the north-west of the Limburg province, Venray (pop. 43.2k)
forms part of the established Venlo-Venray logistics corridor. Good
infrastructure links with 4 international airports within 65km and direct
access to the A-73 motorway and the N-270 which connects the city both
north/south and east/west respectively to Arnhem and Eindhoven. The city
is therefore a strategic location for distribution activity nationally.
Tenure / Built Freehold – 1999 Venray
Asset Description Site area of 22,450 sqm with 24 parking spaces and 15 loading docks
15,290 sqm (97% warehouse, 3% office)
Building constructed in 1999 with clear height of 9.5 m
DKL is a tenant specialising in road transportation and logistic services
WAULT 10.0 years (from 1/10/2018) and 10.0 years to break
Purchase price €9.5m / 6.0% NIY and €621/sqm
Current value €9.5m as at 30 September 2018
Investment The Venray-Venlo region is regarded as the top logistics location in the
Rationale Netherlands and top 5 in Europe
Strong industrial / logistics asset in a supply constrained location
Adds further sector diversification to SEREIT
Attractive inflation linked 10 year income stream
Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
42SEREIT portfolio
Utrecht logistics investment
Opportunity Opportunity to acquire a light industrial asset fully let to three tenants in a
popular business park within the Utrecht region
Location Located in de Wetering, which is 7.5km north-west of Utrecht city centre
and 5 minutes by car from the A-2, motorway. The region neighbours the
new and growing Leidsche Rijn residential district. The asset is 6 minutes
walking distance to the bus stop which offers a 16 minute journey to
Utrecht central station. Utrecht
Tenure / Built Freehold – 2001
Asset Description Total lettable area of 2,492 sqm split between 37% warehouse, 39%
office and 24% other including studio and research areas
30 parking spaces and 1 loading dock
Multi tenanted with 3 tenants including lighting, audio and security
specialists with operations across the Netherlands and internationally
WAULT 8.3 years (from 1/10/2018) and 8.3 years to break
Purchase price €3.1m / c. 7.0% NIY and €1,244/sqm
Current value €3.1m as at 30 September 2018
Investment Strong industrial asset with attractive tenant profiles and covenant terms
Rationale Good location: central Netherlands and close to the intersection of the A-
2 and A-21 connecting the region to the rest of the country
Provides modern and functional accommodation
Given the small size of the transaction, asset liquidity is an additional
strength
Source: Schroders, November 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
43Statement of comprehensive income
12 months to 12 months to
Period
30 Sept 2018 (€m) 30 Sept 2017 (€m)
Rental income 22.3 17.3
Property operating expenses (6.5) (5.5)
Net rental and related income 15.8 11.8
Net valuation profit on investment property 4.9 4.3
Net change in fair value of financial instruments (0.2) 0.1
Realised loss on foreign exchange 0.0 0.0
Expenses (3.6) (3.5)
Finance costs – net interest payments (0.5) (0.7)
Share of profit / loss on joint venture 0.6 (0.2)
Profit before tax 17.1 11.7
Income taxation (1.5) (0.5)
Profit after tax 15.6 11.2
Currency translation differences 0.0 0.0
Total comprehensive income attributable to
15.6 11.2
equity holders
Attributable to owners 13.2 10.3
Non-controlling interests 2.4 0.9
Source: Schroders as at December 2018
44Underlying EPRA earnings
12 months to 12 months to
Period
30 Sept 2018 (€) 30 Sept 2017 (€)
Profit after tax 15.6 11.2
Excluding:
Withholding tax on profit on disposal 0.3 0.0
Net gain on investment property (4.9) (4.3)
Share of Joint Venture loss on investment property 0.0 0.4
Deferred tax 0.4 0.4
Adjustment for non controlling interest’s net revenue (0.8) (0.7)
Finance costs – interest rate cap 0.2 (0.1)
EPRA earnings 10.8 6.9
Weighted average number of shares 133,734,686 132,775,782
Underlying EPRA earnings per share (pence) 8.1 5.2
Earnings excluding property revaluations, gains on disposals, deferred tax, derivative adjustments, and minority interests
Source: Schroders, December 2018.
45Schroder European Real Estate Investment Trust Plc
Discrete yearly performance
Q2 2017– Q2 2016– Q2 2015– Q2 2014– Q2 2013–
Q2 2018 Q2 2017 Q2 2016 Q2 2015 Q2 2014
Share Price Total Return (GBP)¹ -3.0 +8.8 - - -
NAV Total Return (Euro) ² +9.7 +5.2 - - -
NAV Total Return (converted to GBP) ³ +10.7 +10.5 - - -
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as
well as up and investors may not get back the amounts originally invested.
¹ Source: Schroders, Datastream, bid to bid price with net income reinvested in GBP.
² Source: Schroders, NAV to NAV (per share) plus dividends paid.
³ Source: Schroders, NAV to NAV (per share) plus dividends paid. Converted into GBP.
Risk Factors:
– The trust may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in
large changes in the value of the fund, both up or down, which may adversely impact the performance of the fund.
– The Company may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the assets
purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so.
– The trust can be exposed to different currencies. Changes in foreign exchange rates could create losses.
– The dividend yield is an estimate and is not guaranteed.
46Important information For professional investors or advisers only. This material is not suitable for retail clients. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Schroders has expressed its own views and these may change. The data contained in this document has been sourced by Schroders and should be independently verified before further publication or use. This presentation is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The information provided is not intended to constitute investment advice, an investment recommendation or investment research and does not take into account specific circumstances of any recipient. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Information herein is believed to be reliable but Schroder Unit Trusts Limited (Schroders) does not warrant its completeness or accuracy. No responsibility can be accepted for error of fact or opinion. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Risk factors: The forecasts included in this document should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. We accept no responsibility for any errors of fact or opinion and assume no obligation to provide you with any changes to our assumptions or forecasts. Forecasts and assumptions may be affected by external economic or other factors. The trust may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes in the value of the fund, both up or down, which may adversely impact the performance of the fund. The Company may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the assets purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so. The trust can be exposed to different currencies. Changes in foreign exchange rates could create losses. The dividend yield is an estimate and is not guaranteed. Issued in November 2018 by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registered No: 4191730 England. Authorised and regulated by the Financial Conduct Authority. 47
Contact Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU schroders.com
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