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Schroders Investment Trust Conference 2019

Schroders Investment Trust Conference 2019. Schroder European Real Estate Investment Trust Jeff O’Dwyer , Fund Manager, European Real Estate. Contents page. Attractive, diversified income from investing in growth European cities. Highlights. The European growth city strategy.

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Schroders Investment Trust Conference 2019

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  1. Schroders Investment Trust Conference 2019

  2. Schroder European Real Estate Investment Trust Jeff O’Dwyer, Fund Manager, European Real Estate

  3. Contents page Attractive, diversified income from investing in growth European cities

  4. Highlights

  5. The European growth city strategy Acquisitions and asset management support dividend and NAV growth 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, February 2019 1Portfolio market value is based on 31 December 2018, including Rennes purchase for which SEREIT has exchanged and is due to complete in Q1 2019. 2Based on 25 April share price of £1.10 p.s. and GBP:EUR FX Rate of 1.15. Investment Finance European markets Growth strategy • New investments – c.€18m of new logistics investments in the France will take the portfolio to c.€240m and 13 investments1 • Profitable sale of two retail investments at a 10% premium to Dec 2017 value • 100% of portfolio located in higher growth locations • Occupancy over 97%, 6.7 yrs lease length1 • Quarterly dividend equating to annual yield c.5.8% on GBP share price2 • NAV of€183.5m in Dec 2018 (137.2 cents per share) • Annual NAV total return of 6.0% over twelve months to Dec 2018 • 29% LTV at interest cost of 1.4% and duration of 5.5 years1 • Markets:Positive relative economic backdrop: • GDP/sentiment improving • Employment increasing • Voids falling • Rents increasing • Price growth continues • Modest development pipeline • Megatrends: Urbanisation, infrastructure, demographic change • Market presence: Deep local market knowledge and access of Schroder European teams • Asset Management: Execute key asset management initiatives to deliver shareholder returns • Accretive growth: Grow Portfolio through identifying earning enhancing acquisitions • Scale Benefits: Improves diversification, liquidity and cost economies

  6. Portfolio and asset management

  7. Portfolio Invested €240m1 across 13 assets in France, Germany, Spain and Netherlands Source: Schroders, February 2019. For illustrative purposes only and should not be viewed as a recommendation to buy or sell. 1Portfolio market value is based on 31 December 2018 plus Rennes logistics at purchase price. Berlin, Germany Retail Warehouse Stuttgart, Germany Office Frankfurt, Germany Retail Seville, Spain Retail Rumilly, France Logistics Rennes, France Logistics Jan 2016 2019 €0 €240m1 Paris, France Office Hamburg, Germany Office St. Cloud, Paris, France Office St. Apeldoorn, Netherlands Data centre/mixed use Houten and Utrecht, Netherlands Logistics Venray, Netherlands Logistics

  8. Exposure to higher GDP growth, winning centres SEREIT’s Investment Universe SEREIT portfolio located in highest growth regions of Western Europe Source: Oxford Economics, Schroders. April 2019 – total of 13 assets and exposure calculated on investment size. Investment universe consisting of 844 NUTS3 regions in countries shown on map. Data based on Oxford Economics’ annual GDP growth forecasts end-2018 – end 2023 as at March 2019. Forecasts should be regarded as illustrative of trends. Actual figures will differ from forecasts. See ‘Important information’ regarding forecasts. SEREIT’s portfolio vs. Investment Universe Outer ring shows SEREITs direct exposure as a % of value Inner ring shows average for investment universe

  9. Select transactions over the period Sale of retail and deployment into warehouse sector Source: Schroders, December 2018.

  10. Asset management strategy SEREIT has identified short, medium and long-term initiatives Source: Schroders, December 2018. Forecast risk warning: Please see the information slide at the end of this presentation. 2018/2019 2021 2022 2022/2023 2025+ • Improved centres signage, wayfaring, lighting and vibrancy at Metromar completed April 2019 • Lease surrender premium regarding City BKK in Hamburg(5,468 sqm) completed, c.40% in advanced discussions • Refurbishment program for lift lobbies at St Cloud completed end Q3 2018 • Completion of key lettings – Urban Planet and ex. Massimo Dutti at Metromar • Alten expiry – target re-gear prior (6,861 sqm) at Boulogne Billancourt • Re-development potential at Boulogne Billancourt • Stuttgart to benefit from improved infrastructure from the completion of ‘Stuttgarter 21’ • 2025 expiry of initial term at Hornbach, Berlin – 4 hectare site with alternate use potential • Grand Paris Transport improvements St Cloud, Paris St Cloud (Paris) – re-gearing/transport Metromar – improving vibrancy tenancy mix Hamburg – City BKK lease surrender Berlin – 4 hectares in growth corridor

  11. Portfolio overview City, sector and tenant diversification Source: Schroders, February 2019. Data per 31 December 2018, but including Rennes purchase for which SEREIT has exchanged and is due to complete in Q1 2019. Country allocation (value) Sector allocation (value) Lease expiry profile (earliest break)

  12. Continental European investment Duncan Owen Global Head of Real Estate Senior team overseeing real estate platform of over 180 people Support from legal, accounting, operations, risk and client servicing teams based in London, Jersey and Luxembourg Source: Schroders, December 2018. Mark Callender Head of Real Estate Research Andrew MacDonald Head of Real Estate Finance Jeff O’Dwyer Pan European Fund Manager Robin Hubbard Head of Real Estate Capital France Thomas Guyot Germany Nils Heetmeyer Switzerland Roger Hennig Nordics Eva Granlund Benelux Laurent Dubos Local Asset Management Teams Hotel Offices Retail Industrial

  13. Markets

  14. Focus on growth – cities not countries Average GDP growth 2019–2023, % p.a. Major cities and regions expected to outperform national averages Source: Oxford Economics, Schroders. April 2019. The forecast should be regarded as illustrative of trends. Actual figures will differ from forecasts. Please refer to important information regarding forecasts What makes winning cities Infrastructure improvements Transport; distribution; energy; technology Differentiated economy Globally facing; niche; financial services and TMT hub; value added engineering Winning cities Environment Live and work; tourism and amenities; universities; cathedral cities;dominant retailand leisure Employment growth High value new jobs;wealth effect;population growth

  15. European market fundamentals remain supportive Key highlights Source: European Commission, Oxford Economics, JLL, PMA, Schroders. April 2019. Note forecasts should be regarded as illustrative of trends. Actual figures will differ from forecasts. See Important Information regarding forecasts. Economic sentiment in the EU and Eurozone 100 = long-term average ILO-unemployment rates (%) Take-up, 12m rolling totals, ‘000 sqm Office completions and net additions Office completions, m sqm Net-additions, % of stock • Growth remains above trend • Economic sentiment above long-term trend despite global volatility • Unemployment falling – strong growth in office employment, increasing consumer spending • Supply level moderate with (very) low vacancy • Ongoing positive rental growth forecasts • Inflation moderate despite oil prices • No threat from extreme levels of debt • Yields low – but rational Forecast Net additions (LHS)

  16. Debt

  17. Debt financing Current borrowing rates accretive to income returns Source: Schroders, May 2019. 1LTV based on GAV of overall company. Loans summary as at 31 December 2018 Debt strategy Portfolio gearing capped at 35% LTV; loans targeted against assets where most accretive and may be up to 50% LTV 100% of interest rate exposure either fixed or capped; borrowing rates expected to remain low in Europe Ten of the thirteen assets have gearing against them; Rumilly logistics, Paris BB office and the Apeldoorn office are currently ungeared Likely to draw further debt for asset managmetn and cap ex, taking gearing toward 35% LTV Loans by maturity New loans in FY 2018

  18. Summary

  19. The Company investing in European growth cities Delivering investment performance; well positioned for future growth Source: Schroders, February 2019. 1Data per 31 December 2018, but including Rennes purchase for which SEREIT has exchanged and is due to complete in Q1 2019. High quality c.€240m1portfolio located in growth cities and regions across France, Germany, Netherlands and Spain Strong income profile with over 97% occupancy and long term leases Investment and asset management activities and strong market have delivered growth in profits Annualised Euro dividend yield grown to c.5.8% p.a. based on current share price Low cost, long duration debt financing at c.30% LTV1– accretive to income return Eurozone economic backdrop relatively stable; low unemployment Investor and occupier activity in target markets remains strong; high rental growth Megatrends (e.g. urbanisation, infrastructure investment) support long-term focus on growth cities Pursuing asset management initiatives to deliver returns and support growth ambitions, with benefits such as diversification and liquidity

  20. Schroder European Real Estate Investment Trust Plc Discrete yearly performance (%) 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: 1Schroders, DataStream, bid to bid price with net income reinvested in GBP. 2Source: Schroders, NAV to NAV (per share) plus dividends paid. ³Source: Schroders, NAV to NAV (per share) plus dividends paid. Converted into GBP. Risk Factors: The trust may be concentrated in a limited number of geographical 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 fund 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 The trust can be exposed to different currencies. Changes in foreign exchange rates could create losses The dividend yield is an estimate and is not guaranteed

  21. Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. schroders.com

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