London real estate investment trust reveals "positive" outlook as dividends reinstated

A London real estate investment trust has announced that its outlook is “positive” but recovery from the pandemic will be “uneven”.

Schroder Real Estate Investment Trust, a UK-focused REIT, reported that despite the pandemic, it completed 80 new lettings, renewals and reviews across the year, totalling £7.9m of annual income and reducing portfolio vacancy from 7.3 per cent to 4.8 per cent.

The company also saw a collection rate of 90 per cent of rents due over the financial year, and a net asset value of £296.9m, down from 2020’s £309.8m.

It said that its buyback programme has allowed it to reinstate dividends this year, which will total £8m.

Following the impact of the pandemic, the company added that it is reassessing its strategy, refocusing on the environment, social impact, a hospitality mindset and reinvestment into larger assets.

Lorraine Baldry, chairman of the board, commented: “Despite the severe financial and societal impacts of the global pandemic, the outlook for the company is positive.

“This is due to the UK’s faster than expected economic recovery, the underlying quality of the portfolio and its tenant base and the steps taken to minimise the impact of Covid-19 and maximise shareholder returns during the financial year.

“This activity included a successful share buyback programme which, combined with attractively priced new investments, enabled dividends to be reinstated in a progressive manner.

“Whilst the recovery from the pandemic will be uneven and have a differential impact on sectors within the economy, the board and manager expect the company to build on the resilience of the past year, underpinned by its strong balance sheet, exposure to higher growth assets and balance sheet capacity to invest and deliver attractive returns.”

Nick Montgomery, fund manager, added: “The company has a good quality, diversified portfolio that is weighted towards higher growth parts of the UK real estate market, with cash and undrawn credit facilities also providing balance sheet capacity to make further investments and deliver capital expenditure initiatives to enhance total returns.

“Whilst the company is therefore well placed, the pandemic has provided an opportunity to reassess the strategy in light of the acceleration in structural changes and emerging occupier trends.

“This will lead to greater focus on the four areas of: environmental, social and governance; a hospitality mindset and operational excellence; reinvestment into larger assets offering more sustainable income and total returns; and leveraging Schroders’ sector specialist resources to invest across all parts of the UK market.

“These four areas highlighted represent an evolution of the current strategy which, whilst remaining income focused, will place greater emphasis on the delivery of long term sustainable total returns.”

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