LONDON (ShareCast) - (Sharecast News) - UK-focussed Schroder Real Estate Investment Trust confirmed the delivery of a 5% dividend increase in its full-year results on Tuesday, adding that its net asset value had improved 0.7% to £356.4m.
The London-listed real estate investment trust said its net asset value total return slid to 4.5% in the year ended 31 March, from 10.5% in the prior year, reflecting the impact of one-off refinancing and acquisition costs.

Adjusted EPRA earnings improved to £15.2m from £14.1m year-on-year, which resulted in dividend cover of 114%, up from 109%.

Profit for the year totalled £15.9m, down from £33.8m.

During the year, Schroder Real Estate extended the term of its loan facility with Canada Life at a lower rate, and increased the capacity of the Royal Bank of Scotland revolving credit facility to maximise operational flexibility.

Its loan-to-value ratio, net of all cash, reduced to 22.1% from 29.2% during the period.

On the operational front, Schroder Real Estate said it sustained the outperformance of its real estate portfolio during the year, with a total return of 7.2% compared to the IPD/MSCI Benchmark Index of 5.2%.

That resulted in annualised outperformance of 2.0% over the past 12 months, 2.5% per annum over the past three years and 1.4% per annum since IPO in July 2004.

Schroder said its portfolio was supported by "strong" fundamentals, with 93% of the portfolio located in 'Winning Cities', and 68% of its portfolio weighted to the office and industrial sectors - up from 63.5% - with no City of London or shopping centre investments.

Three acquisitions of regional officers were made during the year in Edinburgh and Nottingham, as well as an adjoining industrial ownership in Milton Keynes, totalling £21.85m, equating to a yield based on contracted rental income of 7%.

It said it improved its rental profile with a reversionary income yield of 7.1%, compared to the MSCI/IPD Benchmark Index of 5.4%

A total of £50m of disposals were contracted during the year, and since the year ended, at a blended initial income yield of 2.9%, which Schroder said crystallised its profits from asset management.

It had a pipeline of asset management opportunities to capture future rental growth and improve the defensive characteristics across the portfolio, with the board adding that undrawn loan facilities and cash provided "important" operational flexibility.

"A combination of cash and undrawn revolving credit facilities provides an opportunity to reinvest following a market correction at higher yields," said Schroder Real Estate chairman Lorraine Baldry.

"This places the company in a strong situation and successful execution of this strategy combined with delivering asset management initiatives should provide support for future income, valuation and dividend growth."

Duncan Owen, global head of Schroder Real Estate, added that successful execution of the firm's strategy over the year had supported a dividend increase in contrast to the real estate market slowdown.

"It has also further enhanced our flexibility and balance sheet strength against the backdrop of a more uncertain market environment.

"Recent disposals have realised profits at the same time as the market is experiencing wider price falls."

Reinvestment would target higher income returns than the sales, Owen explained, and that would increase net operating income.

"In the meantime, the company is positioned to explore alternative refinancing strategies which may further increase net operating income.

"For this reason we believe the company is well placed to deliver on its long term objectives and to pursue a progressive dividend policy."

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE