16th Nov 2016 09:34
LONDON (Alliance News) - Schroder Real Estate Investment Trust Ltd on Wednesday said its net asset value declined over the first half of its financial year and signalled forecasts were now pointing to a period of lower returns from UK commercial real estate.
The real estate investment trust said its focus, in this uncertain environment, was on increasing earnings further and reducing risk whilst ensuring it remains in a position to capitalise on any market correction.
Schroder Real Estate said its net asset value at the end of September was GBP316.8 million, or 61.10 pence per share, down from GBP322.6 million, or 62.20p per share, at the end of March, but up from GBP315.8 million or 60.90p per share the prior year.
The group said its capital expenditure increased during the six-month period when compared with the prior year, to GBP5.5 million from GBP1.1 million, which Schroder Real Estate said should deliver higher future returns and improve its portfolio's defensive characteristics.
However, Schroder Real Estate noted the "strong relative outperformance" of its underlying portfolio with a total return over the period of 1.8% compared to negative 1.1% from the MSCI Benchmark Index.
Schroder Real Estate said it completed 35 letting transactions during the period and since the end of September, including 23 completing after the Brexit vote.
The group also sold five smaller, non-core secondary retail assets during the period and since the period end, totalling GBP13.7 million, and said its refurbishment of vacant assets in Cardiff and Bristol was near completion.
Schroder Real Estate declared an interim dividend of 1.24 pence per share for the period, in line with the prior year.
"Following six years of strong returns from UK commercial real estate, a cyclical slowdown combined with the vote to leave the EU is forecast to lead to a period of lower returns," said Chairman Lorraine Baldry.
"However, whilst protracted Brexit negotiations and broader political uncertainty could be a drag on the economy and reduce business investment, the negative impact on the real estate market should be reduced by sustained low interest rates, relatively low levels of new development and lower leverage," Baldry added.
Shares in Schroder Real Estate were up 0.4% at 57.50 pence on Wednesday morning.
By Hannah Boland; [email protected]; @Hannaheboland
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