LONDON (ShareCast) - (Sharecast News) - Schroder Real Estate Investment Trust posted its unaudited half-year results for the six months ended 30 September on Tuesday - a period in which it completed two debt refinancings which reduced interest to 4.0% from 4.4%, with the average loan term dropping to around nine years.
The London-listed real estate investment trust acquired offices in Edinburgh and Nottingham at a net initial yield of 6.7% in the half, which the board said supported its strategy to invest in assets with "strong" fundamentals.

It confirmed a 5% dividend increase would take effect from 1 October.

On the financial front, it reported a net asset value of £357.7m - or 69p per share - reflecting an increase over the period of 1.2%.

Net asset value total return, including dividends paid, was 3.0%, falling from 4.5% year-on-year.

Profit for the six months totalled £10.6m, down from £14.5m 12 months ago, including one-off refinancing costs of £3.1m incurred during the period.

Adjusted EPRA earnings were £7.1m, falling from £7.5m, with a dividend cover of 107%, falling from 117%.

Schroder Real Estate's loan-to-value ratio, net of all cash, was 29.2% at period end, up from 25.3% at the end of March.

Looking at its property portfolio, Schroder Real Estate said it saw "sustained outperformance" of its real estate portfolio, with a total return of 4.5% compared to the MSCI/IPD Benchmark Index of 3.8%.

It said 95% of its portfolio was now located in 'winning cities'.

The firm said significant asset management initiatives included the new ten-year lease without breaks with BUPA, at a rent of £1.09m per annum, reflecting an uplift of 14%.

Letting activity over the period improved the portfolio void rate to 6.0% from 7.2% at the end of March, with its reversionary income yield standing at 7%, compared with the MSCI benchmark of 5.6%, which the board said supported income growth over the next 12 to 24 months.

"The UK real estate market has continued to deliver attractive levels of income and total returns despite growing political and economic risk," said Schroder Real Estate chairman Lorraine Baldry.

"Looking forward, these risks combined with the late stage in the market cycle means we are more cautious about the outlook and may look to realise some of the capital gains across the portfolio.

"The company is well positioned in this environment due to its high quality, diversified portfolio, a high income return, stable balance sheet and potential to enhance income and value from ongoing asset management initiatives."

Duncan Owen, global head of Schroder Real Estate, added that in the face of challenges to the UK real estate market presented by current political and economic uncertainty, the firm would continue to be "active managers", adopting a disciplined approach.

"Our broad pipeline of asset management initiatives provide opportunities to add value throughout the cycle," Owen said.

"This activity is a mainstay of the company's strategic objectives, the delivery of which is intended to sustainably increase net income.

"We will also sell assets where good performance can be realised and reinvest in opportunities which will generate higher net income."

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