Rent collection is up, says Schroder

Schroder European Real Estate Investment Trust says that it has improved rent collection. It said about 93% of rent due for the March quarter was collected, well ahead of the 89% collected in the previous two quarters.

Schroder European Real Estate Investment Trust (Sereit) says it has improved rent collection in the three months to end-March, though it is facing headwinds regarding its shopping centre in Seville, Spain.

The group said in a trading update on Tuesday that about 93% of rent due for the quarter ended March has been collected, ahead of the 89% collected in the previous two quarters.

At the end of March, which is the group’s second quarter, Sereit’s property portfolio was independently valued at €274.3m (R4.75tbn), a decrease of 0.6% from the end of December, or €1.8m.

The value of the group’s 50% interest in the Seville shopping centre, however, fell €6.2m, reflecting an increase in vacancies, declining estimated rental values, and an increased risk to trading at malls from the pandemic in general, Sereit said.

The remaining exposure to this asset now represents 2.9%, or €5.8m of net asset value, the group said.

The bank financing the Seville property has indicated that it expects to instruct a new valuation to formally test the loan-to-value (LTV) covenant in June, which, based on the company’s revised asset value, is likely to show that the 60% LTV covenant has been breached, Sereit said.

The loan is secured solely against the Seville investment, with no recourse back to the group or any other property, Sereit said.

The company said it had an aggregated LTV ratio of about 25% at the end of March, with no debt maturity before 2023. LTV is a measure of the indebtedness of a company.

Most of the group’s portfolio is in the office, as well as industrial and logistics sectors.

Sereit, which acts as a rand hedge for SA investors who want to invest in exposure to European commercial real estate, has expressed optimism about the prospects of large urban centres despite Covid-19.

The group expects that while growth in working from home will have a negative effect on office demand in the short term, this will be offset in the medium term by employment growth in information technology, media and professional services.

The group’s share price closed 2.15% up at R20.43, giving it a market capitalisation of R2.7bn. Sereit has risen 19.8% over the past 12 months.