SREI Schroder Real Estate Investment Trust Limited

For release 8 October 2019

Schroder Real Estate Investment Trust Limited
("SREIT"/ the "Company" / "Group")

REFINANCING OF LONG TERM DEBT AND DIVIDEND INCREASE

Schroder Real Estate Investment Trust, the actively managed UK-focused REIT, is implementing a strategy focused on growing net operating income which delivered a 5% dividend increase in the financial year to March 2019. Today the Company announces a significant refinancing and a further dividend increase:

• £129.6 million fixed rate loan with Canada Life Investments extended from 8.5 to average 16.5 years
• Reduction in the total interest rate from 4.4% to approximately 2.3% per annum, generating an immediate interest saving of approximately £2.8 million per annum
• Negotiated break cost of approximately £28 million funded by cash realised from disposals
• Interest saving to be paid to shareholders as an increased dividend of approximately £16.2 million per annum, equating to an increase of approximately 20%
• The transaction is due to complete on 15 October 2019. The final interest rate and break cost will be based on the closing reference Gilt rates on 14 October 2019

Background to the refinancing

The Company’s strategy is focused on growing net operating income to continue the progressive dividend policy. This has included asset management, selective acquisitions and, over the last 12 months, a disposal programme totalling £85.6 million, reflecting an average net initial yield of 3.1%. These disposals crystallised gains from asset management and contributed to sustained outperformance of the underlying portfolio against the IPD/MSCI Benchmark of 2.0% and 2.3% per annum over one and three years to June 2019 respectively. This activity resulted in the Board increasing the Company’s dividend by 5% in the financial year to March 2019.

In order to lock into low finance costs for a longer term as well as to further increase the net income return to our shareholders, the Company announces that it has refinanced its £129.6 million term loan with Canada Life Investments and extended its maturity with 50% of the loan maturing in 13 years and 50% of the loan maturing in 20 years. The transaction reduces the cost of debt on the loan from 4.4% to approximately 2.3% resulting in interest savings of approximately £2.8 million per annum. The interest savings will be used to increase the Company’s dividend by approximately 20%, starting at the period 1 October 2019. The refinancing has resulted in a negotiated break cost of approximately £28 million, equating to a reduction in the NAV per share of 5.5 pence. The transaction is due to complete on 15 October 2019 at which point the Company will confirm the final terms. The final interest rate and break cost will be based on the closing reference Gilt rates on 14 October 2019.

Future growth in earnings

Following this activity and on completion of contracted disposals in November, the Company will have approximately £80 million of cash and undrawn revolving credit facilities. This provides the Company with operational flexibility to invest in the underlying portfolio and take advantage of more attractively priced investment opportunities that deliver further sustainable growth in earnings.

Duncan Owen, Global Head of Schroder Real Estate, commented:

“The transaction increases net operating income post all costs and debt reduction, and leads to a material increase in the dividend, thereby increasing shareholder’s returns. In addition, it reduces risk with long term and low cost debt. The Company is well positioned; it has long term debt with a conservative LTV and the capacity to take advantage of lower pricing in the real estate markets, with available cash and undrawn revolving debt facilities.”

-ENDS-

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