Returns from Schroder’s European REIT have slipped to just 3.2% thanks in part to the write down of its Seville shopping centre.
SEREIT said valuation increases in the industrial and DIY assets, as well as the German office portfolio, had been offset by the €8.2m (£6.9m) cost of the write-down of its exposure to the Metromar shopping centre to nil.
The 3.2% figure was well below the 16% NAV total return reported last year. However that figure was unusually high, as a result of the one off valuation uplift of SEREIT’s Paris assets following a major refurbishment. The NAV TR for 2019 was 4.1%.
SERE bought the centre from UBS in 2017 for €52.5m in a 50:50 joint venture with Immobilien Europa Direkt, which was advised by Schroder. At the time, Schroder said it had been “tracking this opportunity for some time” and predicted great things for the centre.
That was all changed with the Covid-19 pandemic, which hollowed out its tenant base and led to Metromar being the REIT’s only asset to retain a pandemic “material uncertainty” clause from valuers.
It is now seeking a buyer for the centre.
As at 30 September, the REIT’s diversified property portfolio was valued at €215.7m. In addition, it has built up cash reserves of around €45m as a result of the forward-funding sale of an office building in the Boulogne-Billancourt area of Paris.
The REIT’s IFRS profit for the year to the end of September was €6.2m, down from last year’s €28.4m.
During the period, the portfolio increased on a like-for-like basis by €3.5m, or 1.7%, and by €2.6m, or 1%, post-capital expenditure. Excluding the write-down of Metromar, the REIT’s only shopping centre, the portfolio value increased by €10.2m, or 5.6%.
However, it added that it had €40m of firepower, excluding debt, to take advantage of “a strong pipeline of acquisition opportunities”.
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