Schroder Real Regulatory News (SREI)

For release 21 July 2014

Schroder Real Estate Investment Trust Limited

(the 'Company' / 'Group')

INTERIM MANAGEMENT STATEMENT

Net Asset Value

Schroder Real Estate Investment Trust Limited announces an unaudited net asset value ('NAV') of £238.9 million or 50.7 pence per share ('pps') as at 30 June 2014. This reflects an increase of 4.3% per share compared with the NAV as at 31 March 2014. A breakdown of the NAV movement over the quarter is set out below:

* NAV pps analysis adjusted to reflect the 80,000,000 shares issued on 17 April 2014

The like for like uplift of 3.4% excludes the impact of acquiring a 25% interest in City Tower in Manchester for £33 million on 12 June 2014 and an adjoining ownership in Portsmouth for £1.475 million on 19 June 2014. These properties were revalued to £34 million and £1.5 million respectively as at 30 June 2014, a combined uplift of £1.03 million or 3%.

Strategy

Following the placing in January 2014 that raised gross proceeds of £17.2 million via the issuance of 35,592,128 shares, and the subsequent investment in two property acquisitions, the Board and Manager believed there was potential to enhance returns to Shareholders further through disciplined and accretive growth of the Company.

Consequently, and as previously reported, on 17 April 2014 the Company completed a second Placing and Offer for Subscription that raised gross proceeds of £40.2 million from the issuance of 80,000,000 shares at an issue price of 50.25 pence per share. On completion of the Placing the number of shares in issue increased to 471,513,409.

The Placing and Offer for Subscription, which was oversubscribed, reflected a premium to the prevailing NAV per share as at 31 March 2014 of 3.4%, with the premium increasing to 4.7% on the basis that that new investors were not entitled to the dividend for the period 1 January 2014 to 31 March 2014. As a result of the oversubscription the Board was required to use its discretion to scale back applications.

In addition to issuing 80,000,000 shares the Company secured shareholder consent to issue a further 120,000,000 shares under a placing programme during the period from 18 April 2014 to 19 March 2015, as and when potential acquisitions are identified. All shares issued under the placing programme will be issued at a premium to the prevailing NAV at that point in time.

Following completion of the Placing and Offer for Subscription the Company completed two further acquisitions totalling £34.75 million, referred to earlier, that satisfy the Company's investment criteria by offering good underlying fundamentals in terms of location and specification, affordable rents and sustainable tenant demand.

Following these acquisitions and expenditure since the quarter end, the Company currently has cash totalling approximately £15 million, of which approximately £5 million is available for investment after allowing for operational flexibility and capital expenditure commitments. A pipeline of further potential acquisitions that satisfy the Company's investment criteria are under consideration and the placing programme enables the Investment Manager to act opportunistically whilst also mitigating the risk of cash drag on shareholders funds.

Dividend payment

The Company announces an interim dividend of 0.62 pps for the period 1 April 2014 to 30 June 2014. The dividend payment will be made on 15 August 2014 to shareholders on the register as at 1 August 2014. The ex-dividend date will be 30 July 2014.

Market overview

The latest IPD Monthly Index confirmed an average total return for the three months to 30 June 2014 of 5.1%, comprising an income return of 1.5% and capital growth of 3.5%. The retail sector produced the weakest total return of 4.1% with the office and industrial sectors producing total returns of 6.1% and 5.9% respectively.

Performance versus Investment Property Databank ('IPD') Benchmark Index

The latest available data for the quarter to 31 March 2014 showed that the Company's property portfolio produced a total return of 3.2% compared with 3.5% for the IPD peer group Quarterly Version of Balanced Monthly Index Funds (the 'IPD Index') on a like-for-like basis. Despite the underperformance over three months, over the 12 months to 31 March 2014 the Company's portfolio outperformed with a total return of 13.7% compared with the IPD Index at 12.5%.

Property Portfolio

As at 30 June 2014 the Company's direct property portfolio comprised 55 properties independently valued at £352.46 million. At the same date the direct property portfolio produced a rent of £23.8 million per annum which, based on the independent valuation, reflected a net initial yield of 6.4%. The portfolio's rental value is £26.5 million per annum, resulting in a reversionary yield of 7.2%. The portfolio benefits from additional fixed rental uplifts of £1.5 million per annum due by June 2016.

As a result of the asset management and letting activity over the quarter, the portfolio void rate reduced from 11.7% to 10.7%, calculated as a percentage of portfolio rental value. The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, was unchanged over the quarter at 7.5 years. The tables below summarises the key portfolio information as at 30 June 2014:

* Latest available IPD Index data as at 31 March 2014 

* Latest available IPD Index data as at 31 March 2014

Transactions

Following completion of the Placing and Offer for Subscription on 17 April, on 12 June the Company acquired a 25% interest in City Tower, a landmark mixed use building in Central Manchester, for £33 million, reflecting a net initial yield of 7%. The Company acquired the property alongside two funds managed by Schroders in a simple joint ownership structure with each investor able to call for a disposal of the underlying property.

City Tower provides 615,429 sq ft of office, retail, leisure and hotel accommodation on a three acre island site including 456 car parking spaces. It is located in a prime location within the Central Business District of Manchester with frontage to both Piccadilly Gardens and New York Street. The property is held on a long leasehold basis from Manchester City Council with 218 years unexpired at nil rent. The property provides significant diversification with 115 tenancies and a spread of lease expiries with an average unexpired lease term, to the earlier of lease expiry or break, of 10.8 years.

The offices, representing approximately 65% of the income, are let at a low initial rent of £17 per sq ft with key tenants including the National Institute for Health and Care Excellence, the Ministry of Justice, The University of Law Limited and Aegis Outsourcing (UK) Limited. The property offers significant scope to add value through asset management and also benefits from being central to the city and Manchester's public transport infrastructure network.

On 19 June 2014 the Company also acquired 250 to 254 Commercial Road in Portsmouth for £1.475 million, reflecting a net initial yield of 9.5%. The property adjoins the Company's recent acquisition of 244 to 248D Commercial Road and is let to KFC, Greggs and Ladbrokes producing a rent of £148,000 per annum. The property is situated immediately opposite the proposed site for the 600,000 sq ft Northern Quarter retail and leisure redevelopment, with the proposed anchor store directly facing the subject property. This acquisition results in a combined investment at Commercial Road in Portsmouth of £8.7 million, reflecting a blended net initial yield on the acquisition cost of 8.5%.

Debt

The Company has a single loan facility with Canada Life totalling £129.58 million secured against property valued at £287.56 million as at 30 June 2014. Details of the loan and compliance with covenants are set out below:

* For the quarter preceding the Interest Payment Date ('IPD'), ((rental income received - void rates, void service charge and void insurance) / interest paid)

** For 12 months following the IPD, ((forecast rental income - forecast void rates, void service charge and void insurance) / forecast interest for the next 12 months)

In addition to the property portfolio secured against the Canada Life facility, the Company has unsecured properties with a combined value of £64.9 million and cash as at 30 June 2014 of £20.2 million. This results in a loan to value ratio, net of cash, of 31%.

-ENDS-

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