Schroder European Real Estate Investment Trust (SERE) H2 2024 earnings summary

Executive summary

• Portfolio of 15 institutional-grade commercial real estate assets valued at €208m, diversified across France, Germany, and the Netherlands, with a focus on growth cities and regions, demonstrating resilience amid fluctuating economic conditions and strong occupancy.

• 96% occupancy, c.100% of leases index-linked, providing a strong inflation hedge and stable income, with robust rent collection across key European cities.

• Dividend yield of 7.1%, covered 103% by earnings, with shares trading at a 30% discount to NAV.

• Strong balance sheet with €25m cash and low net LTV of 25%, offering significant operational flexibility.

• Focus remains on enhancing shareholder returns through asset management, lease re-gearing, and selective disposals.

Financial highlights

• EPRA earnings increased by 3% year-over-year to €8.2 million; NAV total return of 0.4% for the year ended 30 September 2024.

• Dividend cover reached 103% for the year, up from 89% the prior year, supported by inflation-linked income and high occupancy; 100% rent collection achieved.

• NAV per share declined 4% to 122.7 cents, reflecting valuation falls in the first half of the year; NAV closed at €164.1 million.

• No new acquisitions or sales during the year; €1.5 million CapEx invested, mainly in French assets.

• Net return for the year was 0.4%, a recovery from -5% the previous year.

Outlook and guidance

• Medium-term outlook for European real estate is positive, with expectations of increased investor demand following ECB rate movements.

• Management priorities include asset management initiatives, re-gearing leases, improving energy and carbon credentials, and targeting growth through selective new investments.

• News on lease re-gearing and potential disposals, particularly in Frankfurt and with key tenants, anticipated in early 2025.

• Focus remains on de-risking major lease expiries and potentially increasing industrial exposure.

• Dividend policy remains conservative, with future increases dependent on further de-risking and earnings growth.