Schroder Real Estate Investment Trust - Interim Results Presentation - Duncan Owen, Nick Montgomery and Rick Murphy - Schroders
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Schroder Real Estate Investment Trust
Interim Results Presentation
Duncan Owen, Nick Montgomery and Rick Murphy 17 November 2020
For professional clients only. This material is not suitable for retail clients
Agenda 01 SREIT overview 02 Portfolio 03 Outlook 04 Appendix Throughout this presentation the Schroder Real Estate Investment Trust will be referred to as SREIT. 1
SREIT overview
Overview of the half year to 30 September 2020
Active asset management, strong balance sheet and capital to invest
Property Performance Financial Performance Income Focus Portfolio
Sustained real estate
NAV total return of -2.2% 84% rent collection for the
outperformance vs. MSCI
over the interim period to quarter to September Focus on regional offices
Benchmark
30 September 2020 and multi-let industrial
86% current rent collection warehousing comprising
+1.0% over interim period;
NAV total return of +1.2% for the quarter to 70% of the portfolio’s value
+1.1% over 1 year;
over quarter to 30 December
+2.0% p.a. over 3 years; and
September 2020
+1.0% p.a. since IPO in 20041
Dividend reinstated in June
Share buy-back programme
at 0.38575 pps equivalent to 25.9% net loan to value at
46 lettings, rent reviews in September and October
50% of pre-Covid level 2.25% total cost p.a.
and renewals totalling achieved average discount
£6.0m, generating an uplift of 46% to NAV
Further 50% dividend £79 million of cash and
of £2.0m p.a.2
increase announced for the undrawn debt facilities for
Buy-back programme to be
quarter to September to reinvestment
recommenced
0.575 pps
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
Source: Schroders, November 2020. 1. Source: MSCI property level returns gross of fees on a like-for-like basis including direct and indirect. 2. This includes activity post-period end.
3
Unaudited interim NAV as at 30 September 2020
Total decrease of -2.8% and a NAV total return of -2.2%
£m PPS Comments
NAV as at 31 March 2020 309.8 59.7
Unrealised decrease in the valuations
of the direct real estate portfolio and (8.4) (1.6)
Joint Ventures Like-for-like valuation movements net of capex -3.4%; by sector was Industrial -0.1%,
Offices -0.9%, Other -6.0% and Retail -10.4%
Capital expenditure (direct portfolio
(5.4) (1.0)
and share of Joint Ventures)
Realised gains on disposals Nil Nil No disposals were made during the six month period
Net revenue 5.1 1.0 EPRA earnings for the six months ended 30 September
No dividend was paid for Q1 2020. The Q2 2020 dividend paid was 50% of the target
Dividend paid (2.0) (0.4)
rate
NAV as at 30 September 2020
299.1 57.7 Reflects prior shares outstanding of 518,513,409
(excluding the share buyback)
c.7.2m shares repurchased at average of 31.6 pps at 30 September 2020
Share buyback (2.3) 0.3
c.15.2m shares repurchased at average of 32.2 pps per share including post period
NAV as at 30 September 2020 296.8 58.0 Reflects shares outstanding of 511,364,955 as at 30 September 2020
4
Income and Dividend illustration
Dividend increased to 0.575 pps to reflect positive activity
EPRA Earnings Dividend
6 months to 6 months to 12 months to – Increased dividend of 0.575 pence per
30 September 30 September 31 March share will be paid in December 2020
2020 £m 2019 £m 2020 £m relating to the period 1 July 2020 to 30
September 2020
Rental income – direct portfolio 10.3 11.8 22.2
– The dividend payment will be made on 11
December 2020 to shareholders on the
Rental income – joint ventures 1.3 1.3 2.6 register as at 27 November 2020. The ex-
dividend date will be 26 November 2020.
Other income 0.1 1.0 1.3 – The dividend of 0.575 pps will be
designated 0.575 pps as an interim
Rental and related income 11.7 14.1 26.1 property income distribution (‘PID’)
– Future dividend increases will be
Property operating expenses (1.7) (1.2) (2.3) considered dependent on further progress
with rental collection rates, acquisitions
and other earnings accretive activity
Expenses (2.6) (2.9) (5.8)
– Note: Additional future income from
Finance costs – net interest reinvestment, asset management and
(2.3) (3.3) (5.3)
payments lower number of shares
EPRA Earnings 5.1 6.7 12.7
Source: Schroders, November 2020.
5
Active strategy to deliver sustainable net income growth
Sales at 3%; refinancing; active management; reinvestment 6.5%+; buy backs
Active Asset Share Buyback
Asset Disposals Debt Refinancing Acquisitions
Management Programme
• £95m of disposals • Refinancing of • Immediate Covid-19 • Disciplined acquisition • Commenced on 8
completed in 2019 at £129.6m reduced the response focussed on strategy focused on September 2020
an average net initial cost of debt on the safety and wellbeing Winning Cities and
yield of 3.0% facility by £2.5m per of all stakeholders resilience of income
• The Company’s shares
at the prevailing price
annum, with one-off
• Disposals crystallised
break fee of £27.4m
• Continued activity • Focussed on income and discount to NAV
profits from asset with 46 new lettings, resilience and good offers attractive value
management and • Extended term to 13 renewals and reviews fundamentals for its shareholders
supported and 20 years since 31 March 2020
performance
• £60m of acquisitions • £5m of share
• Significant covenant • This activity increased at 6.5% equates to c. buybacks to date
• Further disposals of headroom contracted rental £4m of rental income added 1.4% of NAV
non-core assets will income by £2.0m p.a. accretion and
be considered
• Strong pipeline but no
improves dividend
urgency to invest due
cover
to market softening
Strong balance sheet
Reduced cost of debt Improved defensive Disciplined approach Accretive to NAV
with low LTV
qualities of the portfolio
Improved covenant Potential for c. £4m of Income saving on
Positioned to reinvest
flexibility Improved net income rental income dividend
post market correction
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.
Source: Schroders, November 2020.
6
Overview of share buyback programme
Daily average of 500,000 shares per day at average price of 32.2 pps
Price (pps)
Overview (as at 16 October 2020)
80
# shares repurchased
15.2
(m)
70
Shares outstanding
503.3
post repurchases (m) 60
Average price pps 32.2 50
40
Total investment £4.9m
30
Average discount to
-46% Lowest share price of 28.7 pps
NAV
20
NAV accretion 1.4% 10
Implied buyback yield 0
9.6% / 4.8%
(100% / 50% dividend)
Source: Schroders, November 2020.
7
UK real estate market overview
Polarisation accelerating across the sectors
MSCI all property index – capital value
% age change – month-on-month (average – bars; range1 – drop-down lines) and cumulative from end 2015 (line)
SDLT increase EU referendum
6% 6%
Industrial sector Industrial sector Industrial sector
5% 5%
4% 4%
3% 3%
2% 2%
1% 1%
0% 0%
-1% -1%
-2% -2%
-3% -3%
-4% -4%
-5% -5%
-6% Retail sector Retail sector -6%
-7% -7%
Dec
Dec
Sept
Dec
Dec
Feb
Sept
Oct
Oct
Sept
Oct
Sept
Oct
Sept
Jul
May
Jul
Jul
Jul
2016 Jan
Mar
May
Jun
Mar
May
Mar
Jun
Mar
May
Jun
May
Jun
Apr
2017 Jan
Nov
Feb
Apr
2018 Jan
Nov
Feb
Apr
2019 Jan
Nov
Feb
Apr
2020 Jan
Mar
Nov
Feb
Apr
Aug
July
June
Aug
Aug
Aug
Aug
Monthly change Range Cumulative
Source: MSCI as at 30 September 2020; 1Range shows highest and lowest change across 10 segments: Standard retail SE and rest UK; Shopping centres; Retail warehouses; Offices City, West
End/Midtown, rest SE and rest UK; Industrial SE and RUK; other.
8Portfolio
COVID-19: Rent collection and deferrals
86% of September quarter date rent currently collected
Rent collection overview (September quarter) Case-by-case approach to tenant deferment requests
Rent demanded by sector (%) Income impact Capital impact %1
Other Office
Negative short
term
Rent deferment Neutral 41
96% 94% Neutral medium
4% term
27%
40% Lease extension in Negative short
Positive 30
return for rent free term
86%
Remove break in Negative short
Positive 8
return for rent free term
Retail &
Industrial
Leisure
29%
60% 99%
Other structural Negative short
Positive 21
deal term
Rent collected as % of demanded rent
Source: Schroders, November 2020. 1 This analysis is illustrative of proposals both agreed and in negotiation.
10Portfolio overview
Structure vs. the MSCI Benchmark
SREIT MSCI Structure as a % of value post disposals
30/09/2020 30/09/2020
Office - City 0.0
Portfolio value (£m) 397.8 -
3.7
9.5
Number of properties 39 - Office - Mid and West End
7.6
7.3
Net initial yield (%) 5.9 4.8 Office - Rest South East
8.9
Reversionary yield (%)1 7.4 5.3 Office - Rest of UK 22.6
7.7
Rent (£m) 24.9 - 11.1
Industrial - South East
17.2
Estimated rental value (£m) 29.4 -
Industrial - Rest of UK 18.6
Unconditional contracted uplifts for the 9.8
2.7 -
next 24 months (£m) Retail - South East 0.6
8.5
Average unexpired lease term (years)2 5.6 9.7
10.0
Retail - Rest of UK
4.5
Void rate (%) 3 7.1 7.4
Retail - Shopping centre 0.0
Office weighting (%) 39.4 27.9 3.3
12.6
Retail - Warehouse
Industrial weighting (%) 29.7 26.9 9.1
Retail weighting (%) 23.2 25.4 7.7
Others
- Retail single use 17.5 - 19.7
- Retail ancillary to main use 5.7 -
0 5 10 15 20 25
Other weighting (leisure etc.) (%) 7.7 19.7
Portfolio MSCI Benchmark
1 On a like-for-like basis with MSCI i.e. ignoring acquisition costs. 2 Assuming earlier of lease break and expiry capped at 30 years. 3 % of ERV.
11Reversionary income yield of 7.4% (MSCI 5.3%)
Supporting income growth during a period of negative growth
£m
35
c.4
2.1
30 29.4
2.7 1.0
-1.3
24.9
25
Uplift
Top five fixed uplifts Timing
£k p.a.
20 University of Law (London) +416 Jan-21
Lidl (Bedford) +335 Jun-21
BBC Scotland (Edinburgh) +191 Dec-20
Home Bargains (Bedford) +190 Jun-21
Quentor (Norwich) +181 Dec-20
15
Contracted Fixed uplifts next ERV growth Vacant space Overrent ERV New acquisitions
income as at 30 24 months income of
Sep 2020 c.£60m at 6.5%
Source: Schroders, Knight Frank, September 2020. New acquisition income shown for illustrative purposes
12Asset management overview
High quality assets let at sustainable rents with income growth potential
Milton Keynes, Stacey Bushes Leeds, Millshaw London, Bloomsbury, Store Street
(Industrial) (Industrial) (Office; 50% Share)
– 345,000 sq ft multi-let industrial estate – 460,000 sq ft multi-let industrial estate – 85,814 sq ft freehold office and
comprising of 42 units comprising of 27 units educational campus across 0.8 acres
– 10 lettings, renewals and reviews – 6 lettings, renewals and reviews – Rent review with the University of Law
completed generating additional completed generating additional completed post period end
net rent of £225,000 p.a. vs. Mar-20 net rent of £130,000 p.a. vs. Mar-20 – New rent of £1.85m p.a. or £42 per
– Sustainable average rent of £6.25 per – Sustainable average rent of £5.75 per sq ft delivering a £415,500 increase
sq ft vs. average ERV of £7.00 per sq ft sq ft vs. average ERV of £6.50 per sq ft – The Company will receive £326,708 of
– Heathfield Gateway development – Progressing change of use strategy back rent and the tenant has received
completed comprising six units of with completion of the JD Sport Gyms a three month rent free period
circa 15,000 sq ft. Terms out on five unit that adds amenity to the estate – Improving location due to mix of uses,
units at £14.00 per sq ft. – Working with the adjoining land ‘Camden Project’ and infrastructure
– Potential to acquire further adjoining owner to promote a new station to – The new rent reflects a yield of 4.9%
ownerships service the location based on the valuation
Multi-let industrial Multi-let industrial Redevelopment opportunity
Source: Schroders, November 2020.
13Asset management overview (2)
Mixed use and retail assets with sustainable rents in urban locations
Manchester, City Tower Leeds, Headingley Central Bedford, St. John’s Retail Park
(Office / Mixed-use; 25% share) (Retail / Mixed-use) (Retail Warehouse)
– 610,000 sq ft of office, retail, leisure – 90,000 sq ft convenience retail, 98- – 130,000 sq ft retail warehouse scheme
and hotel accommodation on a three room hotel and gym scheme let to 11 tenants with two vacant units
acre island site in the heart of – Top tenants by income are Premier – Lidl and Home Bargains letting
Manchester Inn, Sainsbury’s, The Gym (AFL) and completed generating £525,000 p.a.
– 6 lettings, renewals and reviews Boots. Average rent on retail units rent with higher footfall forecast
completed generating additional reflects c. £50 per sq ft Zone A rents across the scheme
net rent of £130,000 p.a. vs. Mar-20 – Recent asset management includes – 10 year letting to Easy Bathrooms at
– Offering short term ‘plug-and-play’ converting office space into new gym, £22 per sq ft and re-gear with Curry's
leases to achieve premium to ERV lease renewals with William H Brown PC World for 10 years
– Sustainability and public realm and BHF, re-gear with Market Town – Average rent of £17.25 per sq ft with
improvements are a focus. Achieved a Taverns and Heavenly Desserts letting average ERV of £16.20 per sq ft.
BREEAM In Use certification of ‘Good’ – Potential to increase food retail use – Valuation reflects c.7% yield on expiry
for Part 2 Building Management of Lidl and Home Bargains rent free
Winning City Mixed-use convenience-led Value retail warehousing
Source: Schroders, November 2020.
14Sustainable investing
Sustainable and Impact Investing central to approach
– Focussed on ESG and ‘positive impact’ investing to generate
ISAP Case Study:
improved returns, contribute to tenants’ business
performance and create tangible benefits to communities City Tower, Manchester
– ESG and Impact integrated in asset management processes: Community & Social Impact
– Acting responsibly during Covid-19 pandemic – Residencies for local start-ups and charities in the City
Tower pop-up shop
– Signatory to BBP Climate Change Commitment
– Dedicated occupier engagement portal to promote City
– Energy audits undertaken to identify asset opportunities Tower specific events and provide discounts and reduced
fees to local shops, restaurants and gyms
– LED lighting and Automatic Metering programmes
– EV charging installation programme Energy & Waste Management
– 99.5% landlord procured electricity on renewable tariff; – Energy management strategy being implemented
5% fall in like-for-like landlord procured energy in 2019 following building-wide metering audit
– Impact and sustainability action plans (‘ISAP’) for major – Re-negotiated waste management contract to improve
refurbishments initiated with the aim of industry recycling, occupier engagement to reduce plastics and
building awareness of waste reduction at work and home
sustainability accreditations
– Key recent achievements include: Green & Active Transport
– Three star rating in 2019 GRESB survey with 16% scoring – Two onsite dedicated cycle storage areas
improvement. 2020 results expected shortly
– New ‘VeloZone’ with increased cycle storage with drying
– EPRA Best Practice Sustainability Reporting Gold Award room, showers and changing facilities
for the year end accounts
Health & Wellbeing
– BREEAM In Use Certification: ‘Good’ Rating at The Arc,
Nottingham and City Tower, Manchester; ‘Very Good’ at – Health and well-being programme which includes
Cheltenham exercise classes three times per week and on-line yoga
15 Source: Schroders, November 2020.Summary
Summary
Strong balance sheet provides investment capacity to grow net income
– Sales of £95 million of assets at an Investment Capacity
average net initial yield of 3.0% in
2019 £ (million)
£52.5m £79m Acquisitions
80
– Refinancing to lower debt cost and at 6.5% NIY
extend term
70 c.£4m
– 25.9% net loan to value and £79 (Non- rental
million of cash and undrawn debt 60 utilisation income
facilities fee of 0.64%
50 with margin
– Reinvestment to generate of 1.6%)
additional c. £4 million of rental Share buy
40 backs
income, with strong pipeline of c.£65
opportunities million
30 £27m NAV and
to invest
– Share buy backs to increase NAV income
and increase dividend cover accretive
20
– Active management to capture
10
£4.5 million of reversion, of which
£2.7 million is fixed contractual Asset
uplifts 0 management
Cash 30-Sep-20 RCF facility Cash for activity to
– Review dividend each quarter as investment capture
reinvestment occurs and asset reversion
management delivers
Source: Schroders, November 2020. Note activity and additional income are shown for illustrative purposes only.
17Management update from July 2020
No change day to day
RNS ANNOUNCEMENT UPDATE ON THE INVESTMENT MANAGER
The Board of Schroder Real Estate Investment Trust (‘’SREIT’’), the actively managed UK-focused REIT, has
been notified that Duncan Owen, SREIT’s Fund Manager since IPO in 2004, has decided to step down from
his role as Global Head of Real Estate at Schroders REIM (‘’SREIM’’). Duncan Owen will remain at SREIM as
Global Head of Real Estate until 31st December 2020.
From 1st January 2021 Duncan will become a special advisor to SREIM with a focus on SREIT. This will mean
he will continue to work closely with the Board and the existing team including Nick Montgomery, assisting
Schroders in fulfilling its role as the appointed investment manager. SREIT’s investment strategy and
objectives remain unchanged. The board of Schroder Real Estate Investment Trust will continue to monitor
the position closely.
Source: Schroders, July 2020.
18Appendices
SREIT portfolio performance to 30 September 2020
Higher income return and asset management generating relative outperformance
Six Month Total Return Three Year Total Return Since IPO Total Return *
1.0% relative outperformance 2.0% relative outperformance p.a. 1.0% relative outperformance p.a.
(%) 4.0 (%) 7.0 (%) 10.0
Total Return Income Return
6.0
8.0
5.0
2.0
4.0 6.0
3.0 4.0
0.0
2.0
2.0
1.0
-2.0 0.0 0.0
SREIT MSCI Benchmark SREIT MSCI Benchmark SREIT MSCI Benchmark
MSCI sector/total return SREIT total return MSCI Index total return Relative
Six Three Six Three Six Three
Since IPO* Since IPO* Since IPO*
To 30 September 2020 months years months years months years
(% p.a.) (% p.a.) (% p.a.)
(%) (% p.a.) (%) (% p.a.) (%) (% p.a.)
Offices 1.7 5.9 7.9 -0.5 4.3 7.3 2.2 1.5 0.6
Industrial 2.8 14.2 9.4 2.2 10.6 8.6 0.6 3.2 0.8
Retail -6.0 -4.6 3.8 -5.1 -4.5 3.4 -0.9 -0.1 0.4
Other commercial -8.7 -1.6 2.2 -1.8 4.5 7.5 -7.0 -5.9 -4.9
All -0.3 5.0 7.1 -1.3 2.9 6.0 1.0 2.0 1.0
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.
Source: MSCI property level returns gross of fees on a like-for-like basis including direct and indirect property investments. *IPO in July 2004.
20Compliance Disclosure Requirement
Schroder Real Estate Investment Trust – discrete yearly performance
12 months to 12 months to 12 months to 12 months to 12 months to
Discrete Yearly Performance (%)
Sep-2020 Sep-2019 Sep-2018 Sep-2017 Sep-2016
Share Price -39.5 -3.2 1.4 11.9 2.7
SREIT NAV Total Returns -12.6 2.8 8.9 11.8 4.4
SREIT Real Estate Total Returns -1.1 5.4 11.0 12.2 6.6
MSCI UK Balanced Monthly and Quarterly
-2.3 2.7 8.6 9.8 4.4
Funds Quarterly Property Index
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.
Schroder Real Estate Investment Trust – Risk Considerations:
Investments in real estate are relatively illiquid and more difficult to realise than equities or bonds. Yields may vary and are not guaranteed. The use of
gearing is likely to lead to volatility in the Net Asset Value (‘NAV’) meaning that a relatively small movement either down or up in the value of the
Company’s total assets will result in a magnified movement in the same direction of that NAV. There is no guarantee that the market price of shares in
Investment Companies such as SREIT will fully reflect their underlying NAV. The value of real estate is a matter of a valuer’s opinion rather than fact.
The trust may be concentrated in a limited number of geographic 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 funds.
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.
Source: Property portfolio level returns. MSCI September 2020.
2186% of the portfolio located in higher growth locations
% of SREIT Capital Value
3%
11%
11%
15%
% of UK
51% 49%
GDP
37% 23%
Fastest growing centres Second quartile
Third quartile Slowest growing centres
Source: Oxford Economics, Schroders November 2020. Note: Size of the bubbles represents capital values as at 30 September 2020. The colours are where the cities and towns are within
the four quartiles of GDP growth between 2020 and 2025. For illustrative purposes only and should not be viewed as a recommendation to buy or sell. Forecast risk warning: Please refer to
the important information slide at the end of this presentation.
22Overview of SREIT income at 30 September 2020
Diversified income base with 294 tenants across a range of sectors
Top 20 Tenants % by industry2
Rent p.a.
# Tenant
(£m)
% Portfolio
3% 1%
3% 19%
1 University of Law Limited 1.58 6.1 4%
2 Buckinghamshire New University 1.15 4.4
4%
3 The Secretary of State 0.73 2.8
4 Cineworld Cinema Properties Limited 0.58 2.2
5%
5 Matalan Retail 0.57 2.2
6 Express Bi Folding Doors 0.53 2.0 14%
7 TJX UK Limited T/A Homesense 0.51 1.9 5%
8 Jupiter Hotels Limited T/A Mercure 0.46 1.8
9 SportsDirect.com Retail Limited 0.46 1.7 7%
10 Premier Inn Hotels Limited 0.42 1.6
11 Lidl Great Britain Limited
1
0.42 1.6 11%
9%
12 Geldards LLP 0.41 1.6
13 Wickes Building Supplies Limited 0.40 1.5
11%
14 Morgan Sindall Construction 0.38 1.4 Retail Non-Food Manufacturing Education
15 Lloyds Banking Group 0.35 1.3
Business Services Leisure Other Industries
16 Tulip Limited 0.34 1.3
17 Jaguar Land Rover Limited 0.33 1.3 Retail Food Public Sector Wholesale
18 Higher Education Statistics Agency Limited 0.32 1.2 Construction Financial IT
19 Sennheiser UK Limited 0.30 1.2
Transport Other Services Healthcare
20 Smyths Toys UK Limited 0.30 1.1
Sub-total top 20 tenants 10.55 40.3
Utilities Charity
Source: Schroders, MSCI, October 2020. 1 This includes agreement for lease at St John’s Retail Park, Bedford. For illustrative purposes only and should not be viewed as
a recommendation to buy or sell. 2 This data is as at 30 September 2020. Post period end rent review settled that increased University of Law rent to £2m p.a. or 7.5%
23Reinvestment overview
No urgency to reinvest. Focus on resilience of income
Winning Cities Active Management Potential
+
Differentiated economy Secondary Prime
Grade A
Building quality
Infrastructure
Employment
Secondary
Tertiary
Grade B
Environment -
- Income quality +
Sector Focus Target Metrics
• Multi-let industrial acquired below
replacement cost Asset value Net Initial Yield Timing
Industrial
• Regional offices • Potential as part of
Strong fundamental mixed-use building or
£10-30m 6%+ 2020/21
•
Office
Retail
occupational demand where valuation
• Active management
Mixed-use supported by
to capture alternative use
reversionary potential • Mispriced assets
Other Sep-20: £10.2 million Sep-20: portfolio net
average initial yield of 5.9%
Past performance is not a guide to future performance and may not be repeated. The value of investments and the
• Creating rather than buying income from them may go down as well as up and investors may not get back the amounts originally invested.
Source: Schroders, November 2020.
24Results for the six month period to 30 September 2020 Key metrics Period to 30 September 2020 30 September 2019 % change (Loss)/Profit for the period (£8.8m) £4.6m -291% EPRA1 earnings £5.1m £6.7m -23% EPRA1 earnings per share £1.0p £1.3p -23% Dividend per share paid £0.39p £1.3p -70% As at 30 September 2020 30 September 2019 % change Net Asset Value £296.8m £354.3m -16% Net Asset Value per share (pence) 58.0 68.3 -15% Property valuation2 £397.8m £456.2m -13% Loan to Value, net of cash 25.9% 23.1% -12% 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. 1European Public Real Estate Association (“EPRA”) earnings calculated as total comprehensive net income (i.e. after fund expenses and finance costs) excluding realised and unrealised gains/losses on investment property and share of profit on joint venture investments. 2Independent valuers’ valuation of property and joint ventures.. 25
Balance sheet
Summary Balance Sheet (£m)
30 September 2020 31 March 2020 30 September 2019
As at
£million £million £million
Investment properties 1 388.3 397.0 409.1
Cash 78.7 33.1 23.3
Net current assets 11.2 8.4 49.3
Debt (181.4) (128.7) (127.4)
Net Asset Value 296.8 309.8 354.3
NAV (pence per share) 58.0p 59.7p 68.3p
Loan to Value (%) 25.9% 23.7% 23.1%
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 as at November 2020. 1 Excludes leasehold interests grossed up under IFRS 16.
26Underlying EPRA profitability
24% reduction in underlying profit
£ (million)
10
6.7
1.3 5.1
5
(1.5)
(0.9)
(0.5)
0
HY 2019 Rental income Other income Property expenses Expenses HY 2020
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, November 2020.
27Profit bridge
HY 2020 vs. HY 2019
£m Sep-20 Sep-19 £m Sep-20 Sep-19
£ £ (million)
Profit on sale Valuation
15 - £1.5 (£13.9m) (£3.6m)
of properties (Loss)/Gain*
10
4.6m (1.6m)
5
(1.5m)
(10.3m)
(8.8m)
0
-5
-10
HY 2019 Net rental income Profit on disposal of Valuation loss* HY 2020
investments
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, November 2020. *Properties and Joint Ventures.
28Statement of comprehensive income
30 September 30 September 31 March
2020 £m 2019 £m 2020 £m
Rental income – direct portfolio 10.3 11.8 22.2
Rental income – joint ventures 1.3 1.3 2.6
Other income 0.1 1.0 1.3
Property operating expenses (1.7) (1.2) (2.2)
Net rental and related income 10.0 12.9 23.9
Profit on disposal of investment property - 1.5 1.9
Net valuation (loss)/gain on investment property (13.5) (3.5) (17.4)
Expenses (2.6) (2.9) (5.8)
Refinancing costs - - (27.4)
Finance costs – net interest payments (2.3) (3.3) (5.3)
Joint venture (loss)/gains (0.4) (0.1) (2.4)
(Loss)/Profit before tax (8.8) 4.6 (32.5)
Ongoing charges – fund only expenses 1.3% 1.4% 1.4%
Ongoing charges – fund and property expenses 2.5% 2.3% 2.3%
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 as at November 2020.
29EPRA earnings
Earnings excluding property revaluations, gains on disposals and non-recurring expenditure
30 September 30 September 31 March 2020
2020 2019 £m
Year to
£m £m
(Loss)/Profit after tax (8.8) 4.6 (32.5)
Excluding:
Profit on disposal of investment property - (1.5) (1.9)
Net valuation (loss)/gain on investment property 13.5 3.5 17.3
Joint venture (gains)/loss 0.4 0.1 2.4
Refinancing costs - - 27.4
EPRA earnings 5.1 6.7 12.7
Weighted average number of shares 518,056,505 518,513,409 518,513,409
EPRA earnings per share (pence) 1.0 1.3 2.5
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.
Source: Schroders, November 2020.
30Balance sheet overview
Net LTV of 25.9%
– The Company has two debt facilities – a £129.6 million long term fixed loan and a £52.5 million revolving credit facility –
providing operational flexibility. The table below is as at 30 September 2020:
Lender Loan Maturity Total interest Assets Value Loan to Value LTV ratio Interest cover ICR ratio
(£m) 1 rate (%) (£m) ratio (%)2 covenant (%)2 ratio (%)3 covenant (%)3
Canada Life 129.6 50%: 15/10/2032 2.5 4 254.1 51.0 65 359 185
(43.8 net of
50%: 15/10/2039
cash in facility)
RBS 52.55 03/07/2023 1.7 6 104.8 50.1 65 7 871 185
– The Company’s consolidated net loan to value is 25.9% as at 30 September 2020
– Total debt £182.1 million, portfolio value of £397.8 million and cash of £78.9 million
– The Company’s target leverage range is 25-35%
– The debt facilities are secured against the Company’s assets. The Company retains uncharged properties valued at £38.9
million as at 30 September 2020
Source: Schroders as at September 2020. 1 Balance as at 30 September 2020.
2 Loan to Value (‘LTV’) is the loan balance divided by the property value as at 30 June 2020.
3 For the quarter preceding the Interest Payment Date (‘IPD’), ((rental income received – void rates, void service charge and void insurance)/interest paid). In addition,
there is a forward ICR covenant of for the four quarters following the IPD (rental income to be received void rates, void service charge and void insurance)/interest
paid).
4 Fixed total interest rate for the loan term.
5 Facility drawn at 30 June 2020 from a total facility of £52.5 million.
6 Total interest rate as at 30 June 2020 comprising 3 months LIBOR of 0.14% and the margin of 1.6% at an LTV below 60% and a margin of 1.90% above 60% LTV.
7 This covenant drops to 60% after year three of the five-year term.
31£129.6 million Canada Life Loan
Two main covenant tests which are closely monitored by the Manager
– The Canada Life security pool comprises of 32 assets valued at £254.1 million, with the metrics below as at 30 September 2020
Loan to Value (‘LTV’) Interest Cover Ratio (‘ICR’)
As at 30 September 2020 Actual from quarter to September 2020
Loan (£m) 129.6 Rent (£m) £3.3m
Portfolio Value (£m) 254.1 Non-recoverable Costs (£m) (£0.4m)
Gross Loan to Value (%) 51.0% Net Rent (£m) £2.9m
Cash held in Facility (£m) 18.3 Interest (£m) £0.8m
Net Loan to Value (%) 43.8% Interest Cover Ratio (%) 359%
Covenant (%) 65% Covenant (%) 185%
– Net Loan to Value on the secured assets against this loan is 43.8%. On this basis, a decline of 33% in the property value could be sustained
prior to the 65% covenant being breached
– The ICR is 359% based on actual net rents. A 48% fall in net income could be sustained prior to 185% covenant being breached. Assuming
25% non-recoverable costs in addition to rental declines, this equates to 34% rent decline
– The Company has additional flexibility to add cash and assets to the facility to further improve cover against loan covenants
Source: Schroders as at November 2020.
32Important Information Marketing material for professional clients only. 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. Exchange rate changes may cause the value of any overseas investments to rise or fall. Schroders has expressed its own views and opinions in this document and these may change. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. Nothing in this material should be construed as advice or a recommendation to buy or sell. Information herein is believed to be reliable but we do not warrant its completeness or accuracy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. The material is not intended to provide, and should not be relied on for accounting, legal or tax advice. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. No responsibility can be accepted for error of fact or opinion. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. Schroders will be a data controller in respect of your personal data. For information on how Schroders might process your personal data, please view our Privacy Policy available at www.schroders.com/en/privacy-policy or on request should you not have access to this webpage. The forecasts stated in the presentation are the result of statistical modelling, based on a number of assumptions. Forecasts are subject to a high level of uncertainty regarding future economic, and market factors that may affect actual future performance. The forecasts are provided to you for information purposes as at today's date. Our assumptions may change materially with changes in underlying assumptions that may occur, among other things, as economic and market conditions change. We assume no obligation to provide you with updates or changes to this data as assumptions, economic and market conditions, models or other matters change Schroder Real Estate Investment Trust (‘SREIT’) is a real estate investment company with a premium listing on the Official List of the UK Listing Authority and whose shares are traded on the Main Market of the London Stock Exchange. On 1 May 2015 SREIT converted to UK-REIT status. SREIT continues to be an authorised closed ended investment scheme registered in Guernsey with number 41959. Registered office: Royal Bank Place, Glategny Esplanade, St Peter Port, Guernsey GY1 2HS 33
Important Information (continued) Risk considerations of The Real Estate Investment Trust Investments in real estate are relatively illiquid and more difficult to realise than equities or bonds. Yields may vary and are not guaranteed. The use of gearing is likely to lead to volatility in the Net Asset Value (‘NAV’) meaning that a relatively small movement either down or up in the value of the Company’s total assets will result in a magnified movement in the same direction of that NAV. There is no guarantee that the market price of shares in Investment Companies such as SREIT will fully reflect their underlying NAV. The value of real estate is a matter of a valuer’s opinion rather than fact. The trust may be concentrated in a limited number of geographic 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 funds. 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. Use of MSCI data and indices: © and database right MSCI and its Licensors 2013. All rights reserved. IPD has no liability to any person for any losses, damages, costs or expenses suffered as a result of any use of or reliance on any of the information which may be attributed to it For your security, communications may be recorded or monitored. Issued in November 2020 by Schroder Real Estate Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Schroder Real Estate Investment Management Limited is authorised and regulated by the Financial Conduct Authority. Registration number 1188240 England. UP000206 34
Contact Duncan Owen, Nick Montgomery, Rick Murphy Schroder Real Estate Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. schroders.com
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