(Alliance News) - Schroder Real Estate Investment Trust Ltd said Tuesday it has significantly refinanced a loan from Canada Life Investments, in line with the company's strategy to grow its net interest income and increase its dividend payouts.
The GBP129.6 million fixed rate loan has been extended to 16.5 years from 8.5 years, while the total interest rate has been reduced to 2.3% per annum from 4.4%, generating an immediate interest saving of GBP2.8 million per annum.
The interest savings will go towards increasing the real estate investment trust's dividend by 20%, with effect from the period commencing October 1.
The refinancing has also resulted in a negotiated break cost of GBP28 million, equal to a reduction in net asset value per share by 5.5 pence.
The refinancing will be completed on Tuesday next week, following which Schroder REIT will have GBP80 million in cash and undrawn revolving credit facilities.
This is expected to give Schroder REIT addition flexibility to invest in its underlying portfolio and take advantage of better priced investment opportunities.
"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," said Duncan Owen, global head of Schroder Real Estate.
"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," Owen added.
Shares in Schroder REIT were down 3.4% at 53.50 pence on Tuesday in London.
By Dayo Laniyan; dayolaniyan@alliancenews.com
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Schroder Real (SREI)