Schroder says Seville centre may breach banking covenant


Schroder says Seville centre may breach banking covenant


Published Date: 2021-04-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Schroder says Seville centre may breach banking covenant

The real estate investment trust says the Metromar centre is about to be revalued and it is working with its lending partner.

Schroder European Real Estate Investment Trust (SERE) says its Metromar shopping centre in Spain is likely to breach its loan-to-value agreement with its bank when a new valuation is completed. It says it is working proactively with its lending partner to resolve the matter.

In an update, the European property owner said the bank financing the centre, which is located in Seville, planned to formally test the covenant in June. Based on the company's revised value, it said it was likely to show that the 60% ceiling had been breached. The loan was secured solely against the Seville investment, with no recourse back to the group or any other property. The aggregate loan-to-value ratio across its portfolio was 25% at the end of March.

Schroder's portfolio includes 13 properties across Europe that it has identified as growth regions, including Paris, Berlin, Frankfurt, Hamburg and Stuttgart. Its portfolio includes 95 tenants across a range of industries, with about three quarters in the office, industrial and data centre sectors. Retail makes up the other quarter of its portfolio, with 15% invested in a Lidl supermarket in Frankfurt and a Hornbach DIY unit, also in Germany. The Metromar Centre is the only shopping centre in its portfolio, representing 8% of the portfolio value at the beginning of the year.

By the end of March, about 93% of rent due for the quarter had been collected, ahead of the 89% collected over the previous two quarters. Its portfolio was independently valued at €274-million, a decrease of 0.6%, or €1.8-million, from the end of December. Net of approximately €1.4 million of capital expenditure invested in the refurbishment of its landmark Boulogne-Billancourt property in Paris, the valuation decreased by €3.2 million, or 1.2%.

Excluding Boulogne-Billancourt, the like-for-like valuation movement during the quarter was driven by an improved yield re-rating at the Berlin DIY investment, delivering a valuation increase of €1.1-million, or 4.0%, and an improved yield re-rating across the industrial portfolio, delivering a valuation increase of €1.9-million, or 3.9%. At the end of March, its industrial exposure represented 19% of the portfolio by value.

Schroder expects to publish its interim results in early July. Its shares rose 2.2% to R20.43 in light trade yesterday.


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