Schroder European REIT (SERE) - Good discount, impressive portfolio, great yield...

[SKYSHIP]

Commercial Real Estate is a brutally cyclical field. A bear market comes along every so often; and with a combination of luck/skill you may trade out in time to avoid the worse of the troughs.

Those troughs of course create great opportunities; and depending upon your view of the current cycle it could be argued that Q4'22/Q1'23 has and does provide a good entry point.

Of course there are winners and losers, based especially upon debt factors and sector allocation.

The joy of the REIT sector is its transparency and almost mathematical computation. As such it is less exposed to the risks endured by Conventional Trading Companies - as discussed in the Header of ADVFN’s Commercial Property thread (CP+) . That Header shows the charts of 35 secondary REITs, ie there is a wide selection of Runners & Riders to choose from. Handily you can click on any of the charts and be transported to the relevant company Bulletin Board thread.

Over the past 2/3 months there has been a good bounce in many of the players since the sharp falls we saw in Q2/Q3’22. However, there are still bargains to be found. IMO EPIC & SERE are two such.

Schroder European REIT (SERE) is a generalist player, entirely invested on the continent in France, Germany & Holland. The Presentation and Q&A in the link below pretty well tells the full story.

https://www.youtube.com/watch?v=dgLUvtfYAcE

Last week’s portfolio valuation update to Dec’22 shows that valuations on the continent have perhaps been less severely impacted by recent market events. The 3.3% valuation fall for Q4.22 implies a 3.8% cut in NAV from 140.8c (124.6p) to 135.4c (119.8p). With the sp @ c81p, that provides an NAV discount of 32.4%, whilst the yield = 8.02% at a GBP/Euro rate of 1.13.

That dividend is currently uncovered until the recent sale of their largest asset is reinvested. However the 7.4c dividend (1.85c/Qtr) is secure.
LTV is relatively low at 29.8% (20% net of cash). Debt cost is 2.5%; though 30% due for refinancing this year. All explained in the above Presentation.

IMO SERE offers a very reasonable discount; a great portfolio with plenty of asset management potential; and, of paramount importance, a very generous yield. A good BUY at c81p.

[SKYSHIP]

I believe that being quite a small REIT, buybacks (see below) may not be on the agenda for SERE; more likely to use their cash with expanding the portfolio if suitable opportunities arise. Surely a few deals will present themselves as they have a very wide remit being a generalist player across the three countries of Germany, France and The Netherlands.
======================

Extract from last month's Prelims:

Share price

The shares continue to trade at a discount, which as at 28 November 2022 reflected a circa 35% discount to the 30 September 2022 NAV. The Board and the Investment Manager remain frustrated in the share price performance, particularly given the differentiated strategy, strength of the underlying real estate, attractive dividend, local management expertise, strong balance sheet and cash reserves. Annualising the quarterly dividend of 1.85 euro cps (to 7.4 euro cents per annum) provides an attractive circa 8.0% dividend yield based on current share price. The Board will continue to review the discount, and at its discretion to execute a share buyback programme, as well as new acquisitions consistent with the current strategy.

[SKYSHIP]

SERE beginning to move ahead - now 84p-85p.

Loads of people have read this thread; but not one has commented. Hopefully a few bought however.

At 85p the yield is still 7.65% and the discount to December portfolio valuation = 29%.

So not too late to get aboard. A chartist's dream of a large Reverse Head & Shoulders nearly completed (see ADVFN's SERE thread). First target to 90p; then on to 100p at which level the yield would still be 6.5% with a 16.5% NAV discount.

[BullDog]

SERE beginning to move ahead - now 84p-85p.

Loads of people have read this thread; but not one has commented. Hopefully a few bought however.

At 85p the yield is still 7.65% and the discount to December portfolio valuation = 29%.

So not too late to get aboard. A chartist's dream of a large Reverse Head & Shoulders nearly completed (see ADVFN's SERE thread). First target to 90p; then on to 100p at which level the yield would still be 6.5% with a 16.5% NAV discount.

Thank you. Please don't confuse absence of replies with lack of interest. I really appreciate the commentary you kindly share with us all. Thanks again.

BD

[Pendrainllwyn]

I have held for a few years now. The portfolio spans office, retail, industrial, data centres etc so it may not appeal to those who prefer a more focused approach. Management have had success in asset enhancing some of the properties and 80% of rents are inflation-linked. However a Spanish retail asset was written down to zero so they haven't gotten everything right. I am not inclined to add more but will hold.

Pendrainllwyn

[SKYSHIP]

Bulldog - thanks for that. I made that comment simply because I like to read others' considered views - positive or negative.

[thebarns]

Thank you for many of your informative posts Skyship.

I read your post and bought SERE a week ago on the back of your postings.

Your posts often make great sense.

[BullDog]

Bulldog - thanks for that. I made that comment simply because I like to read others' considered views - positive or negative.

You're welcome. I don't have a lot to say since I am still learning about REIT investments. But I am very interested in reading what you have to say. Please keep doing so.

BD

[monabri]

Bulldog - thanks for that. I made that comment simply because I like to read others' considered views - positive or negative.

I echo what Bulldog said. Excellent comments on an area outside of my "comfort zone".

[campervan65]

I've only just read this thread. I noticed the shares are now down to 68p. The ongoing charge seems quite high at 3.72. What are people's thoughts almost a year on? I only own individual shares but have started to look at trusts to add to my portfolio, the charges really put me off. Am I wrong to let the charges put me off?

[BullDog]

I've only just read this thread. I noticed the shares are now down to 68p. The ongoing charge seems quite high at 3.72. What are people's thoughts almost a year on? I only own individual shares but have started to look at trusts to add to my portfolio, the charges really put me off. Am I wrong to let the charges put me off?

I believe you are, yes. The costs of running a property portfolio are considerable. And it's not in shareholders best interests to cut into maintenance that ultimately leads to more expensive repairs in the longer run. Obviously, you have to believe the property management are doing their job properly, but that's another question.

[clissold345]

This is old news but may be of interest on here. In the Half-Year Report on 28th June 2023 they said that they planned to rebase (=cut) the dividend, hence the sharp sp fall at that time.

"Whilst the option to continue paying an uncovered dividend, as many of the peer group do, was strongly considered, the Investment Manager and Board believe that the more prudent, responsible and decisive course of action, and the one that best protects the interest of shareholders, is to rebase the target quarterly dividend level to 1.48 euro cents per share commencing with our third interim dividend payable in October 2023. ..."

https://www.investegate.co.uk/announcem ... rt/7599050

[SKYSHIP]

campervan - Charges. Bizarre how often this keeps coming up. Are you perhaps with HL?

Ongoing charges are 0.2.12%...

[clissold345]

campervan - Charges. Bizarre how often this keeps coming up. Are you perhaps with HL?

Ongoing charges are 0.2.12%...

The AIC website says 2.46%. I imagine there's slightly different ways of calculating it?

[SKYSHIP]

Indeed. Interim Statement states 2.12% (up from 2.09%)

[PrefInvestor]

I've only just read this thread. I noticed the shares are now down to 68p. The ongoing charge seems quite high at 3.72. What are people's thoughts almost a year on? I only own individual shares but have started to look at trusts to add to my portfolio, the charges really put me off. Am I wrong to let the charges put me off?

As with any Investment Trust it is important to look at the charges IMHO. The Ongoing Charges Ratio for a REIT includes all the costs associated with running a REIT, such as management fees, administration costs, property management fees, audit fees, legal fees, and other operational expenses. It is a measure of how efficiently the REIT is run, higher charges mean that the company is being run less efficiently. The more they charge the less benefit to you the shareholder.

A summary of the charges and other important characteristics of UK Commercial Property REITS can be found here:-

https://www.theaic.co.uk/aic/find-compa ... desc=false

As you will note SERE's charges are the second highest in the sector, only second to Regional REIT, so not ideal IMHO.

And dont forget to consider other important factors such as total assets, discount, yield, dividend cover, void rates and debt (usually expressed in LTV) etc. as these are also important factors to consider when assessing a UK REIT.

All IMHO, DYOR etc.

ATB

Pref

[SKYSHIP]

...also sector spread (Office, Industrial, Retail, R/W etc) & tenant spread. So much information to consider; and all of it freely available.

Ongoing charges perhaps the least important IMO!

[PrefInvestor]

...also sector spread (Office, Industrial, Retail, R/W etc) & tenant spread. So much information to consider; and all of it freely available.

Ongoing charges perhaps the least important IMO!

Yes I should have mentioned that too, personally not keen on anything with a a lot of Office accommodation exposure. But that’s just my opinion obviously…..

ATB

Pref