Schroder European Real Estate Investment Trust PLC on Wednesday that its net asset value had fallen, and it was rebasing its next interim dividend due to economic disruption.
The London and Johannesburg-listed property investor said its net asset value per share on March 31 was down 6.0% at 132.4 euro cents per share, from 140.8 cents at September 30, the end of its financial year.
Schroder European’s NAV total return for the six months ended March 31 was negative 4.7%, compared to a positive 5.5% in the same period the year prior.
The company said this was based on a swing to an IFRS loss of €8.7 million, from a profit of €10.9 million the year prior, driven by a market-wide outward yield shift due to interest rate increases.
The company said that commercial real estate values had been falling across the UK and Europe due to political and economic disruption, investors’ pricing of risk, and the availability and cost of financing.
‘Notwithstanding the economic headwinds, the board is pleased by the portfolio’s sector and winning city allocations, strong rent collection and indexation characteristics, which together with management’s asset management expertise has enhanced valuation resilience,’ said Chair Julian Berney.
The company swung to a pretax loss of €8.9 million from a profit of EU12.7 million the year before, whilst net rental income increased to €6.9 million from €5.8 million the year before.
The company’s property portfolio valuation increased by 4.4% to €220.2 million at March 31 from €211.0 million at the same point the year prior.
The company declared a 1.85 cents per share second interim dividend, with a total dividend for the half year at 3.7 cents, a 44% decrease from the interim total dividend of 6.6 cents last year.
Schroder announced that it was rebasing the dividend. The quarterly target minimum dividend will be rebased to 1.48 euro cents per share per quarter, 80% of the current level, starting with the third interim dividend payable in October.
‘This will allow management to be more patient deploying cash reserves into attractive investment opportunities that are likely to arise, as well as enabling the immediate payment of a fully dividend cover,’ Schroder explained.
Schroder said that the outlook for the European economy is improving, and recessionary fears are diminishing, with expectations of modest economic growth for some time due to tightened economic policies to reduce inflation.
‘We anticipate further valuation falls as investors face refinancing dilemmas, sustainability risks and equity investors re-price their cost of capital,’ said Chair Berney.
‘With the strength of our balance sheet, underlying assets and the growth regions that we are exposed to, we believe that we are well placed to manage such risks.’
Shares in Schroder European Real Estate were down 3.8% at 86.20 pence in London on Wednesday morning. In Johannesburg, the stock was up 5.9% at R 20.13.
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