schroder european real estate investment trust...q3 2018. design under way lease surrender premium...

Jeff O’Dwyer: SEREIT Manager Andrew MacDonald: Head of Real Estate Finance

12 June 2018

Schroder European Real Estate Investment Trust Half-year results presentation - 2018

Marketing material for professional investors and advisers only.

Contents page

1

01 Highlights

02 Portfolio and asset management

03 Markets

04 Financial highlights

05 Summary

Highlights

The European growth city strategy Achieved full investment, target dividend in growing European cities

3

Investment Finance Growth strategy European markets

• Full investment – c.€20m Dutch

data centre acquisition at 10% NIY

taking portfolio to c. €237m1

• 85% of portfolio located in

fastest growing cities across 10

investments in western Europe

• Occupancy over 97%, 6.7 yrs lease

length

• 6 new lettings / re-gears achieved

across c. 5,000 sqm and €3.9m

lease surrender premium

• Contracted sale of two retail

investments at a 10% premium to

Dec 2017 value

• Profit increased 157% driven

by valuation and net income

• EPRA earnings grown to

€6.5m – increased from €2.6m

for 2017 interim period

• Quarterly dividend 1.85 cents

p.s., fully covered by net income

• 4.9% NAV increase to

€187.1m (139.9 cents p.s)

• NAV total return of 6.1% over

six months to Mar 18

• 28% LTV at interest cost of

1.3% and duration of c. 6.4

years

• Markets: Broad based economic

recovery:

- GDP / sentiment improving

- Employment increasing

- Voids falling

- Rents increasing

- Price growth continues

- Modest development pipeline

• Megatrends: Urbanisation,

infrastructure, demographic

change

• Market presence: Deep local

market knowledge and access of

Schroder European teams

Dividend: Achieved IPO target of

5.5% on Euro IPO issue price2

Pipeline: Mixture of single asset and

portfolio opportunities to redeploy

Casino proceeds

Accretive growth: Grow portfolio

through earnings enhancing

acquisitions

Scale benefits: Improves

diversification, liquidity and cost

economies

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as

well as up and investors may not get back the amounts originally invested. Source: Schroders, June 2018 1Portfolio market value is based on 31 March 2018. 2Yield based on IPO issue price in Euro

Portfolio and asset management

Portfolio evolution Invested €237m1 across 10 assets in France, Germany, Spain and Neth.

Source: Schroders, June 2018. For illustrative purposes only and should not be viewed as a recommendation to buy or sell. 1Portfolio market value is based on 31 March 2018 including Rennes & Biarritz at contracted option price

5

Jan 2016

€0 €237m1

2018

Retail Warehouse

Berlin, Germany

Office

Stuttgart, Germany

Retail

Frankfurt, Germany

Retail

Rennes, France

Office

Paris, France

Office

St. Cloud, Paris,

France

Retail

Biarritz, France

Office

Hamburg, Germany

Retail

Seville, Spain

Data centre / mixed use

Apeldoorn,

Netherlands

https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwi2g4HTwrnZAhUEthQKHSuoBxIQjRx6BAgAEAY&url=https://en.wikipedia.org/wiki/Flag_of_the_Netherlands&psig=AOvVaw02C7SiUbmfUgXnElsr84rm&ust=1519388839210754

Portfolio overview Ten institutional grade assets located in target growth markets

6 Source: Schroders, June 2018. Data as of 31 March 2018. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

Percentages in charts based on value

City Country Sector Valuation No.

Tenants

Contracted

rents

WAULT to

expiry

Void

€m €m Yrs %

Paris (B-B) France Office 42.1 4 2.4 3.1

Paris (SC) France Office 35.2 11 3.5 5.0 3%

Biarritz France Retail 23.9 9 1.3 9.9 1%

Rennes France Retail 20.9 1 0.9 10.2

France Subtotal 122.1 25 8.0 5.8 1%

Berlin Germany Retail 26.0 1 1.6 7.8

Hamburg Germany Office 16.0 18 0.5 2.8 31%

Stuttgart Germany Office 15.6 4 0.8 7.6 0%

Frankfurt Germany Retail 11.5 6 0.7 6.3

Germany Subtotal 69.0 29 3.7 6.7 7%

Seville Spain Retail 26.0 47 2.0 7.6 4%

Apeldoorn Netherlands Mixed 20.2 1 2.4 8.8

Total Portfolio 237.3 102 16.1 6.7 3%

46%

46%

8%

Office Retail Mixed

Sector allocation

51% 29%

11%

9%

France Germany Spain Netherlands

Country allocation

18%

15%

11%

11% 10%

9%

9%

7% 7%

5%

Paris B-B) Paris (SC) Berlin Seville

Biarritz Apeldoorn Rennes Hamburg

Stuttgart Frankfurt

Property allocation

Management of breaks and lease expiries Asset business plans being executed

7

Source: Schroders, June 2018. Data as of 31 March 2018. Forecast risk warning: Please see the information slide at the end of this presentation.

For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

Lease expiry to earliest termination

Transactions over the period Data centre purchase / Sale of retail

8

Apeldoorn, The Netherlands purchase

Purchase Price c. €20m / €835 psm / 10% NIY

Location Apeldoorn – central Netherlands c. 1 hour drive east of Amsterdam

Description

• Data centre / mixed use investment built in 1970 and refurbished in 06 / 15

• Strategic location in the Netherlands (central, strong ICT labour pool)

• Long term (c.9 years) indexed linked income to KPN

• Attractive net initial yield of approximately 10% and a capital value per sqm

substantially less than replacement cost

• Large site area of over 3.5 hectares. Immediate surrounds include a mixture of

medium density residential, light industrial, retail and offices

Strategy Re-gear lease Longer term alternate use

Source: Schroders, June 2018. Stocks shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.

Rennes & Biarritz, French retail sale

Sale Price 10% premium to last independent valuation

Locations Casino hypermarkets in Rennes and Biarritz, France

Description

• Purchase in June 2016 of two grocery anchored retail investments at a net initial

yield of 5%

• Long term lease provided stable income with limited active asset management

• JV partner (Casino Group) exercised purchase option at a strike price reflecting a

10% premium to last independent valuation

Strategy Re-deploy proceeds into higher yielding investments that enhance diversification

https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwi2g4HTwrnZAhUEthQKHSuoBxIQjRx6BAgAEAY&url=https://en.wikipedia.org/wiki/Flag_of_the_Netherlands&psig=AOvVaw02C7SiUbmfUgXnElsr84rm&ust=1519388839210754

Asset management initiatives

Saint Cloud Office Paris,

France

• Re-gearing of c.25% of the office area with the merging of Fila Assistance

and Garantie Assistance. Revised lease reflects a 4/6/9 year term at an

annual rent 13% above ERV • Commencement of renovation of lift lobbies, with completion due H2 2018

Boulogne-

Billancourt Office

Paris,

France • New lease for communications antenna on a 12 year term

City Sud Office Hamburg,

Germany

• Conclusion of a €3.9m lease surrender premium with City BKK,

representing 4.7 years of annual rent

Metromar Retail Seville,

Spain

• Removed under-performing restaurant and added a new burger specialist • Advancing scope of works that will improve centres signage, wayfaring,

lighting and general vibrancy • Finalised new lease with leisure specialist Urban Planet on an historically

non income producing space totalling 1,200 sqm

2017/18 asset management Successful delivery increased occupancy and rental income

9

Source: Schroders, June 2018. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

Asset Management SEREIT is due to deliver short, medium and long-term opportunities

10

St Cloud (Paris) – re-gearing / transport Metromar – improving vibrancy / tenancy mix

2018 2021 2022/23 2022

Improve centres signage,

wayfaring, lighting and

vibrancy at Metromar due

Q3 2018. Design under way

Lease surrender premium

regarding City BKK in

Hamburg (5,468 sqm)

completed

Refurbishment program for

lift lobbies at Boulogne

Billancourt due end Q2 2018

Completion of key lettings –

Urban Planet and ex.

Massimo Dutti at Metromar

Stuttgart to benefit from

improved infrastructure from

the completion of

‘Stuttgarter 21’

Alten expiry – target re-gear

prior (6,861 sqm) at

Boulogne Billancourt

2025+

2025 expiry of initial term at

Hornbach, Berlin - 4 hectare

site with alternate use

potential

Grand Paris Transport

improvements St Cloud, Paris

Hamburg – City BKK lease surrender Berlin – 4 hectares in growth corridor

Source: Schroders, June 2018. Forecast risk warning: Please see the information slide at the end of this presentation.

Re-development potential at

Boulogne Billancopurt

Continental European investment Senior team

11

Support from legal, accounting, operations, risk and client servicing teams based

in London, Jersey and Luxembourg

Nordics

Eva Granlund

Local Asset Management Teams

Duncan Owen Global Head of Real Estate

France Thomas Guyot

Switzerland

Roger Hennig

Germany Nils Heetmeyer

Mark Callender

Head of Real Estate Research

Andrew MacDonald

Head of Real Estate Finance

Philipp Ellebracht

Head of Real Estate Product, Europe

Offices Retail Industrial

Italy Svicom

Jeff O’Dwyer

Pan European Fund Manager

Source: Schroders, June 2018.

Markets

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Italy

Focus on growth – cities not countries Major cities and regions predicted faster economic growth

Source: Oxford Economics, Schroders. April 2018. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

The forecast should be regarded as illustrative of trends. Actual figures will differ from forecasts. Please refer to Important Information regarding forecasts

Average GDP Growth 2018-2022, % pa

13

SEREIT’s Investment Universe SEREIT’s portfolio vs. Investment Universe

Exposure to higher GDP growth, winning centres SEREIT portfolio located in highest growth regions of Western Europe

14

Source: Oxford Economics, Schroders. May 2018 -Total of 10 assets. Investment universe consisting of 845 NUTS3 regions in countries shown on map. Data based on Oxford Economics’ GDP growth

forecasts end-2017–end 2022 as at March 2018.

Outer ring shows SEREITs

direct exposure as a

% of value

51%

26%

19%

3%

85%

15%

Fastest Growing Regions

Second Quartile

Third Quartile

Slowest Growing Regions

Inner ring

shows average

for investment

universe

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2021

Germany

France

Italy

Spain

Benelux

Nordic

Net Additions

(lhs)

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2005 2007 2009 2011 2013 2015 2017 2019 2021

Germany France Italy

Netherlands Sweden

6065707580859095

100105110115120

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EU28 Eurozone

European market fundamentals remain supportive Key highlights

15

Source: European Commission, Oxford Economics, JLL, PMA, Schroders. May 2018.

Note forecasts should be regarded as illustrative of trends. Actual figures will differ from forecasts. See Important Information regarding forecasts.

Countries mentioned for illustrative purposes only and not a recommendation to buy or sell.

100 = long-term average

Economic sentiment in the EU & Eurozone

ILO-Unemployment rates (%)

Take-up, 12m rolling Totals, ‘000 sq m

Office completions, million sq m

Forecast

Net-Additions (% of Stock)

Office completions & net additions

Robust Eurozone backdrop

Ongoing recovery, strong

sentiment and economic

growth

Unemployment falling –

strong growth in office

employment, increasing

consumer spending

Supply level moderate with

low vacancy

Ongoing positive rental

growth forecasts

No threat from extreme

levels of debt

Yields low – but rational

Forecast

01,0002,0003,0004,0005,0006,0007,0008,0009,000

10,00011,00012,000 Sweden

Iberia

BeNeLux

Italy

UK and

IrelandFrance

Germany

Multiple investment opportunities Deploying capital and growing in line with strategy

16

Source: Schroders, June 2018. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

Opportunity Country Sector Pricing Yield Profile Comment

1

Logistics Warehouse

Status: In exclusivity. Signing

targetted June with completion

August

South west,

France Logistics €9m 6.8% Core

16,700 sqm facility let to a leading food

manufacturer expiring 2025. Located in

industrial area 50kms from Geneva and

110km from Lyon. Rack rented at €40/sqm

pa

2 Aubervilliers

Status: Final bids due end June

Paris district,

France

Light

Industrial €13m 5.5% Core+

Good urban light industrial location to the

north of Paris, c. 1km from Stade de France.

Mixed use location including residential

3

Creteil

Status: Under review

Paris district,

France Office €15m 5.75% Core+

Multi let office building located in the south

east of Paris and considered to be an

improving region with infrastructure

enhancements

4 Utrecht

Status: In exclusivity

Utrecht,

Netherlands

Light

Industrial €10m 6.9% Core+

Two light industrial assets located in and

around Utrecht. Multi tenanted with a

WAULB of c 8 years. Modern construction

having been developed in the last 10 years.

5

Venray

Status: In exclusivity

Venray/Venlo,

Netherlands Logistics €10m 6.0% Core

Long leased freehold logistics investment

located in the Venray/Venlo region – the

premier Dutch distribution location

Total c. €60m

Financial review

Financial highlights for 6 months to 31 March 2018

18

Interim profit grown by 157% to €10.8m

– Driven by valuation uplift, growth in rental income and Hamburg surrender premium

NAV increased by 4.9% to €187.1m (139.9 cents per share)

– NAV total return of 6.1%

EPRA earnings grown to €6.5m (4.8 cents per share)

– Increase from 2.0 cents p.s. for 2017 interim period and 3.2 cents p.s. for 6 months ending 30 Sept 2017

– Includes 1.4 cents per share in respect of surrender premium at Hamburg

Quarterly dividend of 1.85 cents p.a., achieving IPO dividend target of 5.5% yield on Euro IPO issue price

– Total dividends in respect of interim period of 3.7 cents p.s., representing 68% increase on prior interim period

and 23% increase on 6 months to 30 September 2018

– Dividend fully covered from net income

Overall LTV of 28% at a weighted average interest rate of 1.3% and a weighted duration of c. 7 years

Approximately €45m of investment capacity (including debt) post Casino supermarket sale in July

Past performance is not a guide to future performance and may not be repeated. Source: Schroders, June 2018 and www.XE.com


Real estate performance driving NAV and earnings growth

NAV movement for 6 months to 31 March 2018 6.1% NAV total return

19

Source: Schroders and www.xe.com. Numbers based on proportionally consolidated basis and therefore represent SEREITs share of joint ventures.

€m cps Comments

NAV as at 1 October 2017 178.3 133.3

Transaction costs of investments (1.3) (1.0) Transaction costs for Apeldoorn investment

Unrealised gain in real estate valuation 6.2 4.7

Largest movements were:

• Casino supermarkets: +€4.1m, reflecting the agreed sale

price, due to complete at end of July;

• St. Cloud, Paris: +€1.3m from lease regearing and

strengthening market

Capital Expenditure (0.1) (0.1) Capex at Seville and St. Cloud

EPRA earnings 6.5 4.9

Includes €1.9m positive impact on net income from receipt of

part of the surrender premium at the Hamburg asset.

Underlying EPRA earnings increased as portfolio has grown.

Non-cash items (0.5) (0.4) Amortisation of finance costs, change in fair value of interest

rate cap, deferred tax etc

Dividends paid (2.0) (1.5)

Only the dividend in respect of the Jul – Sept 2017 period is

recognised in the NAV movement. The Oct – Dec 2017 dividend

of €2.5m was paid post period end in April 2018.

NAV as at 31 March 2018 187.1 139.9

http://www.xe.com/

0

3

6

9

12

15

31-Mar-17 30-Sep-17 31-Mar-18

Paris - Boulogne Berlin Hamburg Stuttgart Frankfurt Rennes / Biarritz Paris - St. Cloud Seville Apeldoorn

€12.0m

Income statement Acquisitions and asset management generating income growth

20 Source: Schroders. June 2018. Numbers based on proportionally consolidated basis and therefore represent SEREIT’s share of joint ventures.


Growth in annualised gross rental income

6 mths to

31 Mar 2018 (€m)

6 mths to

30 Sept 2017 (€m)

6 mths to

31 Mar 2017 (€m)

Net rental and related income 6.7 6.5 4.9

Surrender Premium 2.4 0.0 0.0

Total Fees and Expenses (1.7) (1.7) (1.9)

Net finance costs (0.4) (0.4) (0.3)

Tax (0.5) (0.1) (0.1)

Underlying EPRA earnings 6.5 4.3 2.6

€million

€14.3m €16.1m

Past performance is not a guide to future performance and may not be repeated.

Fully covered dividend New investments driving dividend increase

21

Source: Schroders, June 2018. 1Yield based on the Euro equivalent of the issue price as at admission. This is a target only and there can be no guarantee that this target will be met.

– Dividend of 1.85 Euro cents per share declared in respect of quarter Jan – Mar 2018

– IPO target achieved - Represents annualised Euro dividend yield of 5.5% on Euro equivalent IPO issue price1

– Converted at Eur:GBP FX rate as at 31 Mar 2018, dividend equates to annualised 6.5% yield on GBP IPO issue price

of 100 pps

– Dividend approximately 100% covered from recurring income from portfolio

– Excludes the impact of receipt of €2.4 million in respect of part of Hamburg surrender premium

– Including the Hamburg surrender premium receipt the dividend is 172% covered from net income

– Progressive dividend policy, sustainable from recurring income

– Dividends in respect of the 6 month interim period total 3.7 Euro cents per share

– Compares to dividends of 3.0 Euro cents p.s. for 6 months to 30 Sept 2017 and 2.2 Euro cents p.a. for 6 months to

31 March 2017

– In exclusivity and negotiation on new investments to replace lost Casino income post 31 July sale

– Casino supermarket disposal will decrease net income by approximately €1.7m p.a. from August onwards

– Dividends declared in Euro and payable in Euro, GBP or Rand (for South African investors)

Loans summary as at 31 March 2018

Debt strategy

Debt financing Current borrowing rates accretive to income returns

22

1. LTV based on GAV of overall company. Source: Schroders, June 2018. Countries mentioned for illustrative purposes only and not a recommendation to buy or sell.

– Portfolio gearing capped at 35% LTV; loans targeted against assets where most accretive and may be up to 50% LTV

– 100% of interest rate exposure either fixed or capped; borrowing rates expected to remain low in Europe

– New loan drawn against St.Cloud office in December 2017 at an interest rate of 1.30% to finance Apeldoorn acquisition

– Eight of the ten assets have gearing against them; one Paris office and the Apeldoorn office are currently ungeared

– Casino supermarket sale will result in buyer taking over SEREIT’s share of the associated loan; reduces SEREIT LTV to 23%

– Different loan maturities to spread refinance risk

– Likely to draw further debt against future acquisitions, taking gearing towards 35% LTV

Loan Loan Amount LTV Maturity Interest Rate

Hamburg/Stuttgart €14.0m 48% June 2023 0.85%

Frankfurt / Berlin €16.5m 46% June 2026 1.31%

Casino Supermarkets €18.2m 45% July 2023 1.35%

Seville €11.7m 45% May 2024 1.76%

St. Cloud €13.0m 38% Dec 2024 1.30%

Total €73.4m 28%1 6.4 Years 1.31%

42%

42%

16%

France Germany Spain

37%

44%

19%

2023 2024 2026

Loans by country Loans by maturity

Summary and outlook

– High quality c. €235m portfolio located in growth cities and regions across France, Germany, Netherlands and Spain

– Strong income profile with over 97% occupancy and long term leases

– Investment and asset management activities and strong market have delivered growth in profits

– Annualised Euro dividend yield grown to 5.5% p.a. based on IPO issue price, driven by growth in net income

– Low cost, long duration debt financing at 28% LTV – accretive to income return

– Robust Eurozone economic backdrop; low unemployment and positive economic confidence

– Investor and occupier activity in target markets remains strong; high rental growth

– Megatrends (e.g. urbanisation, infrastructure investment) support long-term focus on growth cities

– Identified pipeline of assets covering single assets and portfolios for reinvestment of sale proceeds, c.€45m

– Targeting new investments to support growth ambitions and benefits such as diversification and liquidity

The Company investing in European growth cities Delivering investment performance; Well positioned for future growth

24

Source: Schroders, December 2017.

Schroder European Real Estate Investment Trust

Discrete yearly performance

25

Q1 2017–

Q1 20184

Q1 2016–

Q1 20174

Q1 2015–

Q1 20164

Q1 2014–

Q1 20154

Q1 2013–

Q1 20144

Share Price Total Return (GBP)1 7.1% 3.3% - - -

NAV Total Return (Euro)2 9.8% 2.1% - - -

NAV Total Return (converted to GBP)3 13.4% 9.4% - - -

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them can

go down as well as up and you may not get back the amount originally invested. ¹Source: Schroders, Datastream, bid to bid price with net income reinvested in GBP.

²Source: Schroders, NAV to NAV (per share) plus dividends paid.

³Source: Schroders, NAV to NAV (per share) plus dividends paid. Converted into GBP. 4Performance data does not exist for periods before launch in December 2015.

Schroder European Real Estate Investment Trust – risk factors:

The trust may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This

may result in large changes in the value of the fund, both up or down, which may adversely impact the performance of the fund.

The Company may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of

the assets purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so.

The trust can be exposed to different currencies. Changes in foreign exchange rates could create losses.

The dividend yield is an estimate and is not guaranteed.

Appendices

Appendix 1 – Market research

90

95

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reece

Very strong Eurozone economic sentiment Sentiment at mid-2007 peak levels and above long-term averages

Source: European Commission, Schroders, April 2018– last reading Mid-March 2018


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EU28 Eurozone

Economic Sentiment by country

Index. 100 = long-term average 100 = long-term average (Seasonally Adjusted Data)

Economic sentiment in the EU & Eurozone

28

2.0

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Germany France Italy Netherlands Sweden

1Source: PMA, Schroders. April 2018. 2Source: Oxford Economics, Schroders. April 2018

The forecast should be regarded as illustrative of trends. Actual figures will differ from forecasts. Please see the information slide at the end of this presentation.

Labour markets continue to recover Unemployment falling – strong growth in office employment

0.0% 2.5% 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0%

London

Helsinki

Brussels

Barcelona

Vienna

Rotterdam

Manchester

Milan

Dusseldorf

Stuttgart

Lisbon

Paris

Copenhagen

Munich

Hamburg

Lyon

Madrid

Frankfurt

Cologne

Amsterdam

Oslo

Berlin

Stockholm

Luxembourg

Office employment: Forecast growth in absolute

employment between end-2017 to end-20221 ILO-Unemployment rates (%)2

29

European occupier activity remains high Broad based occupier demand

Source: JLL, Schroders. April 2018. Country figures based on major markets. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

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BeNeLux

Italy

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France

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2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Germany France Italy Spain Benelux Nordic Net Additions (lhs)

Office development remains subdued

Building activity supportive of rental growth

Source: PMA, Schroders. April 2018. Net-Additions for Europe ex. UK . Country figures based on major markets. For illustrative purposes only and should not be viewed as a recommendation to buy

or sell. Note forecasts should be regarded as illustrative of trends. Actual figures will differ from forecasts. See Important Information regarding forecasts.

Office completions,

million square metres

Forecast

Net-Additions (% of Stock)

31

32

Source: JLL, May 2018

*Paris, Brussels, Luxembourg and Lyon based on vacancy in newly completed stock

**Barcelona and Madrid estimated


Modern Grade A office space remains scarce Lack of new, grade A space creates opportunity for refurbishments

0

2

4

6

8

10

12

14

Ro

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Mad

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Gla

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Fran

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Vacancy Rate Grade A Vacancy Rate

Appendix 2 – Portfolio information

SEREIT portfolio Paris office investment – Boulogne Billancourt

34

Source: Schroders, June 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

Opportunity Fully let office building with reversion potential

Location Jean Jaurès 221, 92100 Boulogne Billancourt (Paris), France

Tenure Freehold – co-ownership

Asset Description Established market in Paris’ Western Crescent

Good location within Boulogne-Billancourt

Metro line 9 and Paris ring road nearby

Built in 1989, flexible T-shaped floor plates (ca. 800 sqm)

100%-let to ALTEN, a technology consulting and engineering company

until 31 March 2021

WAULT 3.1 years (from 1/4/2018) and 3.1 years to break

Pricing €37.5m / NIY 5.7% / €5,522 psm

Current Value €42.1m as at 31 March 2018

Investment

Rationale

Medium duration lease term with a strong covenant tenant present in

the building since 1998 – provides time to consider refurbishment

Conservative rent level (€312 / ‘office’ sqm/pa) offering a good

alternative to La Défense in a more attractive environment

Area where people live and work; supply constrained

Boulogne-Billancourt is an established market (1.2m sqm of office

stock, the second largest market in the Western Crescent) with average

take-up over 100,000 sqm/pa

Potential to create value and significant reversion potential (c. 30%) by

redeveloping the property at lease expiry

http://maps.stamen.com/


SEREIT portfolio Berlin retail warehouse investment – Mariendorf

35 Source: Schroders, June 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

Opportunity Long let retail warehouse in a growing Berlin region

Location Großebeerenstraße 30, 12107 Berlin, Germany

Tenure Freehold

Asset Description DIY retail unit in Mariendorf, 10 km south of Berlin City Centre

Asset comprises 3 parts: a DIY unit, a garden centre and a trade counter, let to

Hornbach, with a total lettable area of 16,800 sqm

Urban location, surrounded by medium density residential and commercial

accommodation. A separately owned Aldi supermarket adjoins the site; small

potential residential site within ownership

Large site of over 4 hectares

Let to Hornbach Baumarkt AG until 2026


Pricing €24.25m / NIY 6.2% / €1,443 psm


Investment

Rationale

Characteristics consistent with our house view of targeting institutional grade

real estate in growth cities

Hornbach Baumarkt is the one of the strongest DIY operators in Germany;

sector has witnessed some consolidation

Long income stream in defensive segment at an attractive cash yield

Land value is relatively high (c. 20-30% of value) underpinning residual value

Potential for residential conversion in the long run

Small residential site at the rear; opportunity to redevelop

Exploring potential to acquire Aldi supermarket alongside



SEREIT portfolio Hamburg office investment

36


Opportunity Fully let, multi tenanted office property on the edge Hamburg CBD

Location Hammerbrookstraße 94, 20097 Hamburg, Germany

Tenure Freehold

Asset Description Core office investment in Hamburg’s Centre South office sub-market. This

area continues to improve through new retail, residential and office

development; mixed use location

Good micro location, alongside public transport and main arterial roads.

Hammerbrook S-Bahn station (lines S3 & S31) located within 250m, one

stop to central station

Varied office sub-market, catering for private and public sector occupiers.

Increasingly become a back office location; rents at 50% discount to CBD

Modern asset built in 2005. Ground floor retail with strong convenience

offer with office space above


Pricing €14.4m / NIY 6.9% / €2,063 psm


Investment

Rationale

Sub market is improving and increasingly becoming a place where

people want to live and work

Highly liquid lot size that appeals to both institutional and private

investors

High yielding investment with favourable unexpired lease term and an

acquisition price in line with replacement cost

Opportunity to re-gear head lease with BKK



SEREIT portfolio Stuttgart office investment

37


Opportunity Fully let, core office investment anchored by Government tenant

Location Neckarstrasse 121, 70190 Stuttgart, Germany

Tenure Freehold

Asset Description Core office investment centrally located in Stuttgart, the political, economic

and cultural centre of Baden-Württemberg, Germany’s third largest state by

population

Strong micro location close to central station and Schlossgarten park. The

sub-market has a range of government occupiers including various courts of

justice and ministries

Originally constructed in 1960 and comprehensively refurbished in 2005 with

a total lettable area of 5,832 sqm and parking for 71 cars

Efficient floor plate of c. 750 sqm, divisible in two for either cellular or open-

plan offices. Good specification.

Currently 100% occupied with the main tenant being the Federal State of

Baden-Württemberg (81%) with a lease expiry in July 2026


Pricing €14.4m / NIY 5.0% / €2,478 psm


Investment

Rationale

Characteristics consistent with our house view of targeting institutional grade

real estate in growth cities

Stuttgart is one of Germany’s top 7 office markets; very low vacancy

Excellent covenant strength providing long term, secure cash yield

Highly liquid lot size that appeals to both institutional and private investors



SEREIT portfolio Frankfurt retail investment

38


Opportunity Multi let convenience retail centre anchored by Lidl supermarket, located

in a growing urban area of Frankfurt am Main

Location Lorscher Straße 41, 60489 Frankfurt/Rödelheim, Germany

Tenure Freehold

Asset Description Fully let, multi tenanedt convenience retail centre located in Rödelheim;

a growing suburb of Frankfurt am Main with good transport

connections and visibility to main highway

Built 2004 and modernised in 2015 to a high specification

4,525 sqm total rental space with more than 350 parking spaces. 1,600

sqm Lidl supermarket is considered to be the ideal size for new style

convenience/small basket retailing

All retail units have dedicated, secure delivery areas

Site area 8,097 sqm


Pricing €11.05m / NIY 5.6% / €2,478 psm


Investment

Rationale

Well located, high quality building, catering for demand for

grocery/convenience stores from locals and commuters

Fully let with opportunity to change tenant mix and increase rental

income over the medium term

Income underpinned by c.11 year unexpired lease term with main

tenant Lidl

Plan to introduce drug store to improve footfall



SEREIT portfolio Paris (Saint Cloud) office investment

39


Opportunity Best premises in a large office complex at an extremely attractive price

Location Saint-Cloud, an upscale suburban city bordering Paris

Tenure / Built Freehold in a co-ownership / Built in the 1970s, well maintained since

Asset Description Ca. 15,800 sqm of office and storage areas located in ‘Les Bureaux de la

Colline’, a well maintained 65,000-sqm office complex;

Entire building E and the four highest floors in building D i.e. the best

premises in the complex: located near the main entrance with the best views

of Paris and over Parc de Saint-Cloud;

Office area 100% let to 12 tenants with very high historical occupancy ratio (>

90%) at a defensive average rent of €215/sqm/year, but with high service

charges;

Office floor areas range from 700 to 1,500 sqm;

Very good accessibility to the property by car (A13 in front of the building)

and good accessibility using public transport (tramway, metro and bus

stations nearby). Premises includes 303 car spaces


Pricing c. €30m i.e. €1,959/sqm and 9.5% NIY


Investment

Rationale

Acquisition at a discount to conservative estimate of intrinsic / long term

value given special situation (sale before year end)

5 largest tenants of good covenant account for 70%+ of rental income;

Largest shareholding stake in the co-ownership by far (22.4%).

Paris



Opportunity Spanish recovery play via the acquisition of a dominant urban shopping centre

located in one of the fastest growing and most affluent suburbs of Seville,

Spain’s fourth largest city

Location Located in the south western Seville suburb of Mairena del Aljarafe. The centre

benefits from easy car access and is well serviced by public transport with

frontage to the only line that services this part of Seville with the city centre,

making the area a key growth corridor

Tenure / Built Freehold. Constructed in 2006 and acquired by UBS for €104m in 2007

Asset Description Urban shopping centre totalling 23,506 sqm servicing a catchment of 250,000

people within 15 minutes

Strong tenant mix centred on grocery, fashion (50%) and leisure. Recognised

as the fashion destination for its catchment and surrounding towns. Key

fashion brands include H&M, Mango and the majority of Inditex brands (Zara,

Bershka et al)

Strong like for like sales growth; +8% in 2015 and +4% in 2016 and a annual

footfall of c. 4 million. Reasonable rent/TO ratios

Good income diversification with over 50 occupiers

2,787 sqm of vacancy providing for upside potential


Pricing €25.5m and 6.2% NIY (50% interest)


Investment

Rationale

Spain is in its early stages of recovery. Retail is expected to be a key

beneficiary of improved economic and consumer sentiment

Established and dominant centre within its trade area offering scope for

income growth potential

SEREIT portfolio Metromar Shopping Centre - Seville

40 Source: Schroders, June 2018. Maps – http://maps.stamen.com. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

Central Seville



SEREIT portfolio Data centre / office investment, Netherlands

41 Source: Schroders, June 2018. Maps – http://maps.stamen.com. For illustrative purposes only and not a recommendation to buy or sell

Opportunity Opportunity to acquire a freehold office / data centre in Apeldoorn (NL), fully

leased to KPN till Dec ‘26, the largest telecom/IT service provider in the

Netherlands. Attractive yield and purchase price at a significant discount to

replacement cost

Location Apeldoorn (pop. c. 160k) is located in the centre of the Netherlands with good

infrastructure links to both the north/south (via the A-50) and the east/west

(via the A-1). Amsterdam is within an hour drive. The city is an important ICT

employment centres in the Netherlands, catering for over 6,500 jobs in the

sector and growing

Tenure / Built Freehold – Constructed in stages between 1975-85. Renovated 2006, 2016

Asset Description 23,700sqm of GLA (56% office, 22% dataroom, 23% storage) across four

floors + basement.

Site area of 35,731sqm with 495 on site parking spaces (1:48sqm)

Strategic location for KPN – 1 of 10 locations for key data centres

Average rent of €101/sqm – discount to Apeldoorn prime


Pricing €19.8m / 9.9% NIY and €835/sqm

Investment

Rationale

Attractive inflation linked 9 year income stream, strong covenant

Good location: central Netherlands and at the intersection of the A-1 and

A-50, with strong alternate use potential

Apeldoorn expected to be a beneficiary of the trend of the relocation of

back-office functions (particularly ITC) to secondary cities (rents currently

stand at c. 30% of Amsterdam rents)

Apeldoorn

A-50

A-1


Appendix 3 – Financial information

Summary balance sheet

43

Source: Schroders. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

Numbers based on proportionally consolidated basis and therefore represent SEREITs share of joint ventures.

*FX rate of £1 : €1.138 as at 31 March 2018 (FX Rate: 30 Sept 2017 £ : €1.134) Source:www.xe.com.

As at 31 Mar 2018 (€m) As at 30 Sept 2017 (€m)

Investment properties 237.0 211.6

Cash 24.9 27.2

External third-party loans (73.4) (60.4)

Net current liabilities (1.4) (0.1)

NAV 187.1 178.3

NAV per share €/£* €1.399 / £1.23 €1.333 / £1.18

– Sale of Casino supermarket investments at the end of July will result in:

– Reduction in property portfolio of €44.8m

– Increase in net cash balance of €27.9m

– Reduction in net debt balance of €18.2m

– Resulting new investment capacity will be €45m - €50m, including debt

Impact of sale of Casino supermarkets

Simple balance sheet with low leverage

Statement of comprehensive income

Source: Schroders as at June 2018

Period 6 months to

31 Mar 2018 (€m)

6 months to

31 Mar 2017 (€m)

Rental income 10.3 7.4

Other income (surrender premium) 2.4

Property operating expenses (3.9) (2.0)

Net rental and related income 8.8 5.4

Net valuation profit on investment property 6.4 1.6

Net change in fair value of financial instruments 0.0 0.2

Expenses (1.6) (1.9)

Finance costs – net interest payments (0.1) (0.5)

Share of profit / (loss) on joint venture 0.3 0.0

Profit before tax 13.7 4.8

Income Taxation (0.8) 0.2

Profit after tax 12.9 4.6

Attributable to owners 10.8 4.2

Non-controlling interests 2.1 0.4

44

Earnings excluding property revaluations, gains on disposals, deferred tax, derivative adjustments, and minority interests

Underlying EPRA earnings


Period 6 months to

31 Mar 2018 (€m)

6 months to

31 Mar 2017 (€m)

Profit after tax 12.9 4.7

Excluding:

Net valuation profit / loss on investment property (6.4) (1.6)

Share of Joint Venture loss on investment property (0.2)

Deferred tax 0.4

Adjustment for Minority Interests net revenue (0.4) (0.4)

Finance costs – interest rate cap 0.1 (0.2)

EPRA earnings 6.4 2.5

Weighted average number of shares 133,734,686 131,811,609

Underlying EPRA earnings per share (pence) 4.8 1.9

45

Schroder European Real Estate Investment Trust Plc

Discrete yearly performance

46

Q4 2016–

Q4 2017

Q4 2015–

Q4 2016

Q4 2014–

Q4 2015

Q4 2013–

Q4 2014

Q4 2012–

Q4 2013

Share Price Total Return (GBP)¹ +4.1 0.8 - - -

NAV Total Return (Euro) ² +7.3 -0.3 - - -

NAV Total Return (converted to GBP) ³ 11.7 15.4 - - -

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up

and investors may not get back the amounts originally invested.

¹ Source: Schroders, Datastream, bid to bid price with net income reinvested in GBP.

² Source: Schroders, NAV to NAV (per share) plus dividends paid.

³ Source: Schroders, NAV to NAV (per share) plus dividends paid. Converted into GBP.

Risk Factors:

– The trust may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large

changes in the value of the fund, both up or down, which may adversely impact the performance of the fund.

– The Company may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the assets purchased

increase in value by more than the cost of borrowing, or reduce returns if they fail to do so.

– The trust can be exposed to different currencies. Changes in foreign exchange rates could create losses.

– The dividend yield is an estimate and is not guaranteed.

Important information

47

For professional investors or advisers only. This material is not suitable for retail clients.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as

up and investors may not get back the amount originally invested.

Schroders has expressed its own views and these may change. The data contained in this document has been sourced by Schroders and should be independently

verified before further publication or use. This presentation is intended to be for information purposes only. The material is not intended as an offer or solicitation

for the purchase or sale of any financial instrument. The information provided is not intended to constitute investment advice, an investment recommendation or

investment research and does not take into account specific circumstances of any recipient. The material is not intended to provide, and should not be relied on

for, accounting, legal or tax advice. Information herein is believed to be reliable but Schroder Unit Trusts Limited (Schroders) does not warrant its completeness or

accuracy. No responsibility can be accepted for error of fact or opinion. Reliance should not be placed on the views and information in the document when taking

individual investment and/or strategic decisions.

Risk factors:

The forecasts included in this document should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on

our own assumptions which may change. We accept no responsibility for any errors of fact or opinion and assume no obligation to provide you with any

changes to our assumptions or forecasts. Forecasts and assumptions may be affected by external economic or other factors.

The trust may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes

in the value of the fund, both up or down, which may adversely impact the performance of the fund.

The Company may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the assets purchased

increase in value by more than the cost of borrowing, or reduce returns if they fail to do so.

The trust can be exposed to different currencies. Changes in foreign exchange rates could create losses.

The dividend yield is an estimate and is not guaranteed.

Issued in June 2018 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registered No: 4191730 England. Authorised and regulated by the

Financial Conduct Authority. UK12914

Contact Schroder Investment Management Limited,

31 Gresham Street, London EC2V 7QA.

schroders.com

schroder european real estate investment trust...q3 2018. design under way lease surrender premium...

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