For release 17 February 2025

Schroder Real Estate Investment Trust Limited

NAV UPDATE FOR THE QUARTER TO 31 DECEMBER 2024

4.0% NAV TOTAL RETURN SUPPORTED BY INDUSTRIAL WEIGHTING AND ACTIVE MANAGEMENT

Schroder Real Estate Investment Trust Limited ('SREIT' or the 'Company'), the actively managed REIT focused on improving the sustainability performance of buildings to generate higher income and capital growth, announces its 31 December 2024 net asset value ('NAV'), an asset management update, and further progress selling smaller non-core assets on completion of business plans.

Financial highlights

·    NAV total return for the quarter of 4.0% (30 September 2024: 2.0%), reflecting the Company's strongest quarterly performance since June 2022

·    NAV increase of 2.5% to £297.8 million or 60.9 pence per share ('pps')

·    Annualised dividend yield of 6.9% on 14 February closing share price of 50.6p

·    Quarterly EPRA earnings increased 6.7% to £4.5 million, or 1.0 pps

Balance sheet highlights

·    Sector-leading debt terms with a weighted average maturity of 8.8 years and interest cost of 3.5% on drawn debt

·    Incremental positive fair value benefit of the fixed-rate loan of £18.4 million, which is not reflected in the Company's NAV

·    Net loan to value 36.6% (30 September 2024: 37.3%)

Operational highlights

·    Quarterly portfolio capital growth of 1.5% (MSCI Benchmark: 0.8%)

·    Quarterly portfolio total return of 2.9% (MSCI Benchmark: 2.0%)

·    Strong leasing momentum maintained, with 12 deals completed across 223,804 sq ft:

o  Two new lettings of vacant units adding £147,000 of rent, 1% ahead of 30 September 2024 independent valuation estimated rental value ('ERV')

o  Five lease renewals generating total rent of £328,000, which is £94,000 or 40% ahead of the previous passing level and 3% ahead of 30 September 2024 ERV

o  Five rent reviews with a total rent of £1,194,000 which is £287,000 or 32% ahead of the previous passing level

·    Progressing sustainability improvement and decarbonisation strategies with significant near-term leasing pipeline, notably at the recently completed industrial refurbishments in Manchester and Swindon, and office refurbishments at Northampton and York, which are expected to further drive income and earnings growth

Dividend

·    Quarterly dividend paid of £4.3 million, or 0.879 pps (30 September 2024: 0.853 pps)

·    Quarterly dividend 104% covered by EPRA earnings (30 September 2024: 100%)

·   The Company will announce an interim dividend for the period 1 October 2024 to 31 December 2024 on 25 February.

Alastair Hughes, Chair of the Board, commented: "The portfolio has delivered three consecutive quarters of capital value appreciation, driven by rental growth and modest yield compression. Our differentiated and active strategy is enabling us to deliver real momentum driving rents up to 40% higher than previous passing and supporting consistent earnings growth."

Nick Montgomery, Fund Manager, added: "The 2.5% quarterly net asset value increase follows the 0.5% increase in the prior quarter, and demonstrates the resilience of our underlying portfolio, which is high yielding and weighted towards higher growth sectors. We see no slowdown in our ability to capture the high portfolio reversion, and significant work is ongoing in implementing our Brown to Green strategy, with a full update to be provided with the annual results later this year."

NAV

A breakdown of the quarterly movement in the NAV is set out below:

Property portfolio

As at 31 December 2024, the underlying portfolio comprised 38 properties valued at £473.9 million. It generated annual rent of £28.5 million, reflecting a net initial yield of 5.6% (MSCI Benchmark: 5.1%). Note that the University of Law, the tenant at Store Street in Bloomsbury, is in a 10-month rent free period ending on 16 October 2025. Adding back the Company's share of its annual rent, being £2,359,885, would result in a net initial yield of 6.1%. The portfolio's ERV is £39.6 million, reflecting a reversionary yield of 8.4% (MSCI Benchmark: 6.1%).

The portfolio void rate was 11.6% calculated as a percentage of ERV, with 0.2% of space completed since the period end and a further 3.6% of space currently under offer and in advanced legal negotiations. The weighted average unexpired lease term, assuming all tenants vacate at the earliest opportunity, is 5.3 years. A further update on portfolio activity will accompany the dividend announcement.

The tables below summarise portfolio information as at 31 December 2024:

Sector weighting

Region weighting

Balance sheet and debt

The weighted average interest rate for total debt drawn at the quarter end was 3.5%, with an average maturity of 8.8 years, with 88% either fixed or hedged against movements in interest rates. The Company has significant headroom on all covenants. A summary of the key terms as at 31 December 2024 is in the table below:

As at 31 December 2024, the Company had cash, including cash held in joint ventures, of £7.6 million and a net loan to value ratio of 36.6%, slightly above the long-term strategic target range of 25% to 35%. The Company is taking steps to reduce the net loan to value ratio back in line with the target range, including a post quarter end disposal, and others in progress or planned.

Asset management

The Company continues to deliver on its asset management programme, with key activity since 26 November 2024 including:

Industrial

·    At Millshaw Park Industrial Estate, Leeds, a rent review has completed on two of the three units occupied by Express Bi Folding Doors Limited.

o  The review for Unit 23 was settled at £260,256 per annum, an increase of 38% on the previous passing rent.

o  The review for Unit 24 was settled at £358,394 per annum, an increase of 41% on the previous passing rent.

·    At Union Park Industrial Estate, Norwich, a lease variation has completed with Quentor Limited to remove its June 2025 break in return for 1.5 months of rent free. As part of the deal, the tenant has agreed to settle the 10 June 2025 rent review at £291,813 per annum, an increase of 45% on the current passing rent and 46% ahead of the September 2024 ERV.

Retail

·    At Headingley Central an agreement for lease with a 15-year straight term has exchanged on Unit 24 with McDonalds at a rent of £75,000 per annum, subject to planning. On a per sq ft basis this is an increase of 28% compared to the previous passing rent.

·    Two agreements for lease have exchanged with Iduna EVCI Asset Co 1 Limited ('Be.EV'), with both being 20-year leases at a combined rent of £146,400 per annum. Be.EV, part of the Octopus Energy Generation Group, will rent 11 electric vehicle charge points at each of Headingley Central and St John's Retail Park, Bedford. Be.EV will pay all planning costs and the cost of installation of the substation, cabling, charging points and other infrastructure.

·    At Imperial House, Sheffield, a rent review has completed with the tenant Welbeck CP (Pinstone) Limited, at £232,250 per annum, an increase of 5% on the previous passing rent.

·    As previously reported, at Churchill Way West retail park in Salisbury we have exchanged an agreement for lease with Lidl Great Britain Limited ('Lidl') to occupy unit 1 and part of unit 2, totalling 22,206 sq ft, on a new 25-year lease at £440,000 per annum or £19.81 per sq ft. On a per sq ft basis is an increase of 67% on the previous passing level and 32% ahead of September 2024 ERV. This is subject to planning which is progressing positively.

Disposal

Contracts have been exchanged to sell 15/16 King Street in Truro, a Grade II listed freehold asset comprising two ground floor retail units for £1.25 million. The price is 25% ahead of the 30 September 2024 independent valuation of £1.0 million. This follows the lettings of the ground floor retail units, with the price reflecting a net initial yield of 8.0%.

As noted in the interim results, further disposals are under consideration.

-ENDS-

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