NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN.
10 October 2016
SCHRODER EUROPEAN REAL ESTATE INVESTMENT TRUST PLC
The Board of Schroder European Real Estate Investment Trust plc (the 'Company') today announces a proposal to issue new Ordinary Shares by way of a placing (the 'Placing'), pursuant to the terms and conditions of the Placing Programme established under the prospectus issued by the Company dated 11 November 2015 (the 'Prospectus'). The Company aims to provide shareholders with a regular and attractive level of income together with the potential for income and capital growth through investing in commercial real estate in continental Europe. Once fully invested, the Company will target an annualised Euro dividend yield of 5.5% based on the euro equivalent issue price at IPO.
Background to and reasons for Placing and use of proceeds
Since the initial public offering in December 2015, the Company has fully deployed all the equity raised, totalling €151.7 million, into income producing, commercial real estate assets located in strategically identified growth cities of Continental Europe. Highlights include:
· The acquisition of seven assets, located in large, liquid and mature markets including Paris, Hamburg, Frankfurt, Berlin and Stuttgart;
· A property portfolio independently valued as at 30 September 2016 at €148.2m, representing a 4.6% increase on the total acquisition price and an increase during the three months to 30 September 2016 of 0.4%;
· A portfolio with the following characteristics:
- a property level net initial yield of 5.6%;
- relatively long duration index linked leases, averaging seven years;
- good tenant diversification with established public and private sector occupiers;
- institutional quality office and retail investments; and
- value-add potential through implementation of asset management initiatives;
· The debt drawdown in August, equating to 24% LTV, at a blended all in interest cost of 1.19% for an average duration of 7.75 years, considerably below the property net initial yield and accordingly accretive to property income returns; and
· A maiden dividend of 0.8 Euro cents per share paid to investors in September 2016.
The Company believes that its strategic focus on large continental European conurbations and those cities and regions benefitting from structural shifts, such as urbanisation, should continue to offer sustainable long term performance. In the three months to 30 September 2016, the Company has seen consistent levels of investment and occupier behaviour across the target markets, with demand for good quality institutional grade real estate remaining strong. Being well established, with active occupier / investment demand, the target markets are considered by Schroders as likely to be more resilient in the long-term and are also well positioned to capitalise on any structural change which may result from a progressive shift of occupiers from the UK to major EU cities.
The Company continues to identify attractive investment opportunities in the target European markets. The current near term investment pipeline is approximately €150 million, which compares to cash currently available for investment of approximately €45 million. For this reason the Company is seeking to raise capital to fund the investment programme. The current pipeline of acquisitions has a net initial yield in excess of the initial yield on the current portfolio and will provide further asset diversification. To that end, mindful of the growth objective of the Company and with the benefits of greater economies of scale, enhanced liquidity and improved portfolio diversification that the acquisition of new assets will bring, the Board is proposing this issue of new Ordinary Shares.
Sir Julian Berney Bt., Non-Executive Chairman of the Company, commented:
"Having successfully delivered on our stated strategy at IPO of investing in assets that provide attractive income distribution with potential for long-term income and capital growth through active asset management, we believe that now is an opportune time to take the next steps in our growth strategy. With our focused property strategy and strong pipeline of assets identified, we are well positioned to take advantage of the fundamentals driving long term performance in major European cities."
Under the Placing, the Company is proposing to issue new Ordinary Shares at the Placing Price (the 'Placing Price'), which will be based on the last published NAV per Share as at 30 June 2016, converted into sterling and adjusted for, among other things, the first interim dividend and a premium in the range of 3-5%. Based on the current GBP/EUR exchange rate this would lead to a Placing Price in the range of approximately 120 pence to 123 pence. It is expected that the actual Placing Price will be announced on Thursday, 20 October 2016, based on the GBP/EUR exchange rate prevailing on Wednesday, 19 October 2016.
The Placing is expected to close at 3.00 pm UK time (4.00 pm SA time) on Friday, 21 October 2016 but may close earlier (or later) at the absolute discretion of the Company, in consultation with Numis and PSG Capital, who are acting as joint placing agents to the Company. The Placing is not being underwritten.
Participation in the Placing in the UK will be available only to persons falling within Articles 49(2)(a) to (d) or 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 or to persons whom the Ordinary Shares may otherwise lawfully be offered under that Order. Participation in the Placing in South Africa will be available only to persons who are invited to participate and who fall within any of the categories envisaged in section 96(1)(a) of the South African Companies Act or who subscribe for a minimum amount of R1,000,000 (one million Rand) per single addressee acting as principal, as contemplated in section 96(1)(b) of the South African Companies Act. Such persons are invited to apply for new Ordinary Shares by contacting their usual contact at Numis and PSG Capital.
The new Ordinary Shares issued pursuant to the Placing will rank pari passu in all respects with the existing Ordinary Shares (save for any dividends or other distributions declared, made or paid on the Ordinary Shares by reference to a record date prior to the allotment of the relevant new Ordinary Shares).
As stated in the Prospectus, the Company intends to declare and pay dividends on a quarterly basis. The first interim dividend of 0.8 Euro cents per share was paid in September. The second interim dividend in respect of the period to 30 September 2016 is due to be declared in late November. On this basis it is expected that the new Ordinary Shares issued pursuant to the Placing will rank for entitlement for this second interim dividend. For the avoidance of doubt, an allowance has been made in calculating the Placing Price to take account of the fact that the new ordinary shares will be entitled to receive this second interim dividend.
Applications will be made to the UK Listing Authority and the London Stock Exchange for the new Ordinary Shares issued pursuant to the Placing to be admitted to the premium segment of the Official List and to trading on the London Stock Exchange's main market for listed securities. In addition, application will be made to the JSE for the new Ordinary Shares issued pursuant to the Placing to be admitted to trading on the JSE's main board for listed securities. It is expected that such admission will take place at commencement of trading on Friday, 28 October 2016 (or such later date as may be agreed between the Company, Numis and PSG Capital).
Capitalised terms in this announcement shall (unless expressly stated otherwise) have the meaning given to them in the Prospectus. A copy of the Prospectus is available from the Company's website at www.schroders.co.uk/sereit and is available for inspection during usual business hours on any day (Saturdays, Sundays and public holidays excepted) at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M 7SH and at the offices of PSG Capital, 1st Floor Ou Kollege, 35 Kerk Street, Stellenbosch, 7600 and 1st Floor, Building 8, Inanda Greens Business Park, 54 Weirda Road West, Wierda Valley, Sandton, 2196.
Sponsor, Broker and Placing Agent in the UK
Numis Securities (UK investors)
Tel: 020 7260 1000
David Benda (Corporate)
Sponsor and Placing Agent in South Africa
PSG Capital (SA investors)
Tel: +27 21 887 9602
PR Advisor to Schroder European Real Estate Investment Trust plc
FTI Consulting - UK
Tel: 020 3727 1000
Dido Laurimore/Ellie Sweeney/Richard Gotla
FTI Consulting - SA
Tel: +27 (0) 11 214 2402
Max Gebhardt/Trevor Jones
This announcement has been prepared by, and is the sole responsibility of, Schroder European Real Estate Investment Trust PLC.
Numis Securities Limited is acting only for the Company in connection with the matters described in this announcement and is not acting for or advising any other person, or treating any other person as its client, in relation thereto and will not be responsible for providing the regulatory protection afforded to clients of Numis Securities Limited or advice to any other person in relation to the matters contained herein.
PSG Capital is acting only for the Company in connection with the matters described in this announcement and is not acting for or advising any other person, or treating any other person as its client, in relation thereto and will not be responsible for providing the regulatory protection afforded to clients of PSG Capital or advice to any other person in relation to the matters contained herein.
The Company is not and will not be registered under the US Investment Company Act of 1940, as amended. The Ordinary Shares have not been, nor will they be, registered under the US Securities Act of 1933, as amended (the "Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States or under the applicable securities laws of Australia, Canada, Japan or the Republic of Ireland. Subject to certain exceptions, the Ordinary Shares may not be offered or sold in the United States, Australia, Canada, Japan or the Republic of Ireland or to or for the account or benefit of any national, resident or citizen of Australia, Canada, Japan or the Republic of Ireland or any person located in the United States. The Placing and the distribution of this announcement in other jurisdictions may be restricted by law and the persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions.
This information is provided by RNS