JOHANNESBURG - Listed Schroder European Real Estate Investment Trust (Sereit) is almost fully invested in terms of its strategy outlined in its initial public offering and may undertake a further equity raise.
Jeff O’Dwyer, the lead manager for Sereit Investment Management, said yesterday that the company's near-term priority was to deploy the remaining investment capital totalling 30million (R479.5m), including leverage.
O’Dwyer said this remaining equity would be invested in a manner consistent with the existing portfolio in urban areas and regions that would grow faster than their domestic economies.
“We've identified a range of potential investment opportunities that would be accretive to the company's earnings, which we believe provides a strong platform to grow the company to benefit shareholders.
“Once fully invested, we will assess our next steps, which may include a further equity raise, as we continue to see interesting investment opportunities in the market with returns accretive to earnings and performance,” he said.
The strategy of Sereit was to build a high-quality portfolio of commercial real estate in the growth markets of western continental Europe that provided an attractive level of income.
Pipeline
Julian Berney, the chairperson of Sereit’s board, said the remaining investment capacity of 30m was already allocated to an identified pipeline of opportunities in Sereit’s target markets.
Berney said economic growth in these markets was advancing and this was having a positive impact on occupier demand and rental levels.
He said uncertainty remained around events such as the UK's vote for Brexit, but strategic focus on winning cities and regions meant the company was well-placed in changing market circumstances and may potentially benefit if the outcome of negotiations led to more businesses in continental Europe.
Sereit’s portfolio was valued at 211.7m at its year-end in September, which was an uplift of about 7.1% on the purchase price.
Two acquisitions in the year to September in Paris in France and Seville in Spain grew the property portfolio owned by the company to nine assets located across what Sereit referred to as “winning cities and regions in France, Germany and Spain”.
These were the acquisition of an office building in Paris for 30m and a 50% share of Metromar shopping centre in Seville in a joint venture with Schroder-managed Immobilien Europa Direkt for 26.2m.
Berney said there were a number of value enhancing asset management initiatives across the portfolio that were either under way or identified, including reducing voids, lease restructuring and property refurbishments.
The portfolio generates 14.3m a year in contracted income and the average unexpired lease term is 4.4 years to first break and 6.8 years to expiry.
Total dividends of 5.2 euro cents were paid in the financial year to September after a fourth interim dividend of 1.5 euro cents was paid in the financial year.
Sereit said this represented an annualised rate of 4.4% based on 1.37, being the euro equivalent of the issue price at admission.
It is targeting an annualised euro dividend of 5.5% based on the euro equivalent issue price as at admission.
Berney said Sereit remained on target to deliver this once fully invested.
Nett asset value increased in the year by 13% to 178.3m or 133.3euro cents a share, including a gross equity raise of 16.7m in the reporting period.
Underlying European Public Real Estate earnings grew significantly to 6.9m from 1m.
Shares in Sereit dropped 1.12% yesterday on the JSE to close at R20.37.