Schroder Real Regulatory News (SREI)

For issue 20 July 2015

Schroder Real Estate Investment Trust Limited

(the 'Company')

ACQUISITION OF MILLSHAW INDUSTRIAL ESTATE IN LEEDS

Schroder Real Estate Investment Trust announces that it has exchanged contracts to acquire Millshaw Industrial Estate in Leeds for £22.7 million, reflecting a net initial yield of 7.25%. Completion of contracts is expected by 22 July 2015.

Millshaw Industrial Estate comprises a freehold, 463,400 sq ft multi-let industrial estate constructed in the 1990's on a 28.3 acre site with 27 units ranging in size from 2,683 sq ft to 56,440 sq ft. The property is strategically located close to major roads being only three miles from junction 27 of the M62 motorway, 0.5 miles from the junction 1 of the M621 motorway and two miles south of Leeds city centre. The property has significant frontage to Leeds' A6110 ring road and is located near to alternative uses including The White Rose Shopping Centre, The White Rose Office Park, car showrooms and residential.

The property is let to 20 tenants and produces a rental of £1.73 million per annum or £3.77 per sq ft, with four vacant units representing 4% as a percentage of rental value. The average unexpired lease term is 5.5 years assuming the earlier of lease expiry or tenant break option. Restricted supply of new industrial and warehouse development in Leeds creates an opportunity to reposition the estate by refurbishing units as leases expire in order to achieve higher rents. On this basis the rental value of the estate is estimated to be approximately £2.2 million per annum or £4.80 per sq ft, resulting in a reversionary yield of 8.4%.

The acquisition is consistent with the Company's strategy to acquire property offering good fundamentals with the potential for higher rental value growth, value enhancing asset management and an increase in net income.

The acquisition has been funded using existing cash and a revolving credit facility ('RCF') from Royal Bank of Scotland, which can be drawn down and repaid as often as required. The key terms of the RCF are as follows:

· £20.5 million facility that will be fully drawn at completion

· Four year loan term

· Margin of 1.6% per annum above three month LIBOR

· Loan will be partially hedged by acquiring an interest rate cap at completion

· No amortisation meaning that all excess income after the payment of interest is available to be distributed

The loan will be secured against Millshaw Industrial Estate and two other properties with a combined value of £37.15 million. The RCF is independent of the Company's long term loan with Canada Life and the Company's investments in City Tower in Manchester and Store Street in London remain uncharged with no debt. Following completion the Company's overall net LTV will be 32%.

The acquisition and related financing delivers the following benefits:

· The above average acquisition yield combined with the relatively low cost of debt increases net income by approximately £1.2 million per annum and dividend cover by approximately 10%;

· The RCF can be repaid and redrawn as often as required which provides the Company with a flexible source of funding alongside the potential for future new equity issuance; and

· Following completion of the acquisition and fully drawing the RCF the Company will have cash of approximately £9 million.

Commenting, Duncan Owen, Global Head of Real Estate at Schroders said: "This acquisition, together with the new RCF facility, supports our strategy to increase net operating income whilst also providing opportunities for active management to add value."

-ENDS-

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