Schroder European REIT annual results to illustrate the improving conditions in the real estate sector, with the second half of its financial year (the six months to 30 September 2024) displaying signs of stability.

The company’s NAV fell 4.3% to 122.7 euro cents per share, with the decline primarily driven by outward yield movement in the first half. Its property portfolio valuation decreased 3.6% to €208.1m, entirely weighted towards the first half of the year.

The portfolio’s operational performance was more positive, with underlying EPRA earnings up 3% to €8.2m (2023: €8.0m), primarily due to rental growth offsetting the impact of higher interest costs.

These earnings covered total dividends declared for the year (which totaled 5.92 euro cents) by 103%.

The company completed a major strengthening of its balance sheet during the year with all near-term debt maturities refinanced. There are no further debt expiries until June 2026 and the average interest cost has been maintained at a low 3.2%. Loan to value (LTV) of 25% and €25m of available cash.

Sir Julian Berney Bt., chairman, commented: “Despite the broader challenges facing smaller REITs, the Company is well positioned, with a differentiated and compelling investment thesis focused on assets with robust property fundamentals in higher growth European cities.

“We have a high conviction, shared by our shareholders and supported by the stabilisation in values that we have seen in more recent quarters, that the current strategy and pipeline of value-enhancing asset management initiatives will continue to drive earnings, support a covered and ultimately growing dividend, and deliver risk-adjusted returns for shareholders.”

Jeff O’Dwyer, fund manager, added: “The portfolio has demonstrated notable resilience, which is testament to the quality of our assets and local teams, as well as the focus on high performing sub-markets. Although further short term macroeconomic volatility is expected, the medium term outlook is supportive of real estate investment. Our focus moving forward is to maintain our balance sheet strength whilst capturing the portfolio reversion to boost earnings and asset liquidity, with the aim of reducing the current share price discount.”