Schroder Real Estate Investment Management is on the cusp of completing the turnaround of the former Matrix European Property Fund – once valued at €500m (£412m).
On Christmas Eve, the fund manager, led by Duncan Owen, paid off the final €54m of its €201m Lloyds Banking Group facility ahead of an extended June maturity, netting it a €17m early repayment incentive.
According to Schroders, this represents a saving equivalent to £0.43 a share.
The payment was made 17 months after Schroders was selected ahead of four rival parties to replace fund manager Matrix Asset Management after its parent fell into administration.
Schroders is being paid a base management fee of €1.6m over the two-year wind-down period and fees on each disposal.
The listed trust was already in a “realisation phase” at that stage, having returned £7.1m to shareholders. Owen’s strategy was not glamorous or complex: it was old-fashioned asset management aimed at achieving a brisk disposal at premiums to book value, alongside a key debt restructuring in October 2013.
In the second half of last year some €211m of assets were offloaded, three out of four at or above book value. Sales included the €49.5m Europort logistics property in Frankfurt.
The fund’s debt is now paid off and the share price of the London-listed fund has risen from 60p a share in June 2012 to more than 130p this month. If shares reach 160p Schroder will get an additional performance fee.
Tony Smedley, head of continental European property, said: “We have done what we said we would do when we took on the management of the portfolio. Today the trust is debt free, which gives us far greater operational flexibility as we manage the remaining portfolio.”
However, it was not all smooth sailing – Europort was sold at less than book value and €5.1m cash was used to top up the final Lloyds payment. Owen said this was a strategic move to get the €17m debt reduction.
Now that the vehicle is debt-free will shareholders start to realise value from the remaining €68.2m portfolio.
Owen said: “The strategy is now being further reviewed to ensure that the European REIT has the best plan to maximise future shareholder returns from this point in the cycle.”
