Schroder says Paris property will be transformational


Schroder says Paris property will be transformational

Published Date: 2019-09-11 | Source: Stephen Gunnion | Author: Stephen Gunnion

Schroder says Paris property will be transformational

As part of its Winning Cities strategy, the group has been redeploying the proceeds from property sales into higher growth sectors.

Schroder European Real Estate Investment Trust (REIT) says the redevelopment of its Boulogne-Billancourt office property will be transformational for the company as it strengthens and diversifies its portfolio. And it will result in better returns for shareholders.

It bought the freehold property in western Paris for €37.5 million more than three years ago, with five years remaining on its lease to a leading technology consulting and engineering company. Earlier this year, it agreed heads of terms with the tenant for a new long-term lease commitment. As part of the agreement, it plans to undertake a significant capital expenditure programme to refurbish the building. It said the deal had the potential to deliver both NAV (net asset value) return upside and improve the longer-term income and portfolio profile.

It's part of Schroder's strategy to have a diversified income-generating portfolio focused on the Winning Cities and regions of Continental Europe, balanced across different growth sectors.

Reporting back for its June quarter yesterday, Schroder said its NAV increased by 0.3% to €183.3 million or 137.1c per share from a quarter earlier. That gave it an NAV total return of 1.7% for the quarter. It's paying a third interim dividend of 1.85 euro cents for the year ending 30 September, in line with its target dividend of an annualised rate of 5.5% on its initial public offering issue price of 137 euro cents per share. It's approximately 6% of last Friday's closing share price.

At the end of June, the company owned 13 properties in what is sees as the growth cities of Continental Europe, independently valued at €241.6 million at a blended net initial yield of 6.2%. Over the quarter, the portfolio value, net of capex, increased by 0.5%. The portfolio generated a net property rental income of €3.9 million, representing an ungeared quarterly property income return of 1.6%.

Its shares fell 3.7% to R19.61 yesterday.

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