Schroder European Real Estate Investment Trust PLC (SEREIT) recently released its property portfolio valuation update. The company, which invests in real estate across European growth cities, reported stable property values supported by robust income growth.
Property Portfolio Valuation Overview
As of 30 June 2024, the independent valuation of SEREIT’s direct property portfolio stands at €208.3 million. This reflects a slight increase of 0.1% (€0.2 million) over the quarter, indicating a stabilisation in property values.
| Portfolio Sector | Valuation Change (€) | Percentage Change (%) |
|---|---|---|
| Retail | +0.8 million | +1.9% |
| Industrial | +0.6 million | +0.8% |
| Office | -0.7 million | -0.8% |
| Alternative Assets | -0.5 million | -3.1% |
The portfolio’s income profile remains strong, benefiting from rental growth, indexation, and high occupancy (96%), diversified across approximately 50 tenants.
Retail Sector Performance
The retail assets portfolio experienced a valuation increase of €0.8 million, or 1.9%. This growth was mainly due to the Frankfurt grocery asset, which saw a 6.8% increase (€0.8 million). The rise followed a new 15-year lease extension with anchor tenant Lidl. Meanwhile, the Berlin DIY store valuation remained unchanged.
Industrial Sector Performance
The industrial portfolio’s valuation increased by €0.6 million, or 0.8%. This growth was driven by estimated rental value (ERV) increases in Houten (4.0%) and Venray II (5.3%) in the Netherlands. Additionally, index-linked income growth in Nantes, France, contributed 1.7%.
Office Sector Decline
The office portfolio saw a valuation decline of €0.7 million, or 0.8%. The declines were recorded in Hamburg (-0.9%), Stuttgart (-0.8%), and Paris (-0.8%). This was primarily due to a 10-basis point outward yield shift in Germany and adjusted letting assumptions by valuers in Paris.
Alternative Assets Performance
The alternative assets portfolio valuation decreased by €0.5 million, or 3.1%. This was attributed to the mixed-use data centre in Apeldoorn, which saw a decline due to the shortening remaining lease term. The Cannes car room valuation remained unchanged.
Financial Stability and Flexibility
Based on the values as of 30 June 2024, the portfolio’s loan-to-value (LTV) ratio is approximately 33% based on gross asset value and 24% net of cash. This provides significant financial flexibility for the company.
| Metric | Value |
|---|---|
| Total Property Value | €208.3 million |
| Portfolio LTV (Gross Asset Value) | 33% |
| Portfolio LTV (Net of Cash) | 24% |
| Occupancy Rate | 96% |
Joint Venture in Seville
SEREIT also holds a 50% interest in a joint venture in Seville, which continues to be recognised at nil value. This aspect of the portfolio remains unchanged from previous reports.
Conclusion
The stabilisation in SEREIT’s property values, particularly in the retail and industrial sectors, underscores the company’s robust income profile. High occupancy rates and rental growth support this stability. The company’s strategic management of its portfolio, including successful lease extensions and index-linked income growth, contributes to this positive outcome. Despite some declines in the office and alternative assets sectors, SEREIT maintains significant financial flexibility, positioning it well for future opportunities and challenges.