Schroder Real Estate

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Interim Results for the Period Ended 30 Sept 2021

RNS Number : 1925T

Schroder Real Estate Inv Trst Ld

23 November 2021

For release 23 November 2021

Schroder Real Estate Investment Trust Limited

("SREIT"/ the "Company" / "Group")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021

INCREASED PORTFOLIO ALIGNMENT TO HIGH GROWTH SECTORS AND ACTIVE ASSET MANAGEMENT UNDERPINNING NAV, EARNINGS AND DIVIDEND GROWTH

Schroder Real Estate Investment Trust, the actively managed UK focussed REIT, today announces its interim results for the six months ended 30 September 2021.

Key financial highlights

· 9.0% increase in Net Asset Value ('NAV') to £323.4 million or 65.8 pps (31 March 2021: £296.8 million or 60.4 pps)

· Net asset value ('NAV') total return of 11.3%

· EPRA earnings of £8.3 million (30 September 2020: £5.1 million), reflecting improving rent collection and a reduction in bad debt provisions, as well as the impact of recent acquisitions and active management

· IFRS profit of £33.2 million (30 September 2020: £-8.8 million)

· Underlying portfolio total return of 8.9% vs. the MSCI Benchmark Index at 7.7%

· Loan to Value ('LTV'), net of all cash, of 30.7%, within the long-term strategic range of 25% to 35%

· Dividends paid during the period totalled £6.5 million, or 1.33 pps, an increase of 8% over the period, with a further 7.5% increase announced for the quarter to 30 September 2021, to be paid in December

· Dividend cover of 127% based on EPRA earnings

· Reduction in the Investment Manager's fees to generate an annualised saving of approximately £650,000 per annum, effective from 1 July 2021

Key operational highlights

· Robust rent collection rate of 92% during the period, rising to 98% for the quarter to December 2021

· Including post period activity, 50 new lettings, renewals and reviews completed, generating an additional £800,000 per annum of rental income

· Portfolio vacancy of 4.9%, close to historic low

· Post period acquisition of four asset industrial portfolio in the north west of England for £19.85 million, reflecting a net initial yield of 6.9% and increasing the industrial portfolio weighting to 44%

· Including the post period end industrial portfolio acquisition, 86% of the portfolio weighted to the industrial, office and retail warehouse sectors (31 March 2021: 85%)

ESG achievements

· GRESB score improved from 71 to 75, with three-star rating retained in the 2021 GRESB sustainability survey

· EPRA Best Practice Sustainability Reporting Gold Award for the fourth consecutive year

· Post period end planning permission secured for first north-west Net Zero Carbon warehouse development

Lorraine Baldry, Chairman of the Board, commented:

"The outlook for the UK real estate market is positive, with economic growth expected to continue, coupled with a supportive interest rate environment. Whilst we expect ongoing divergence in returns across the real estate market, with the industrial sector continuing to outperform over the short to medium term, the polarisation experienced over recent years is expected to narrow as more employees are encouraged to return to offices and sentiment continues to improve towards more resilient parts of the retail sector. Our diversified portfolio, and exposure to Winning Cities and Regions, means we are well positioned to benefit from these trends."

Nick Montgomery, Fund Manager, added:

"Good progress has been achieved over the period in delivering the strategy against the backdrop of improving market conditions, with the outcome being healthy growth in the NAV, sustained outperformance of the underlying portfolio and further increases in the level of dividend."

"Whilst the focus is on growing net income and dividends, we are also investing in existing assets to maximise returns and ensure the portfolio remains resilient in response to structural changes and evolving occupier trends. A key part of this is evolving our approach to delivering operational excellence for occupiers as well as demonstrating continued improvements in sustainability performance."

A webcast presentation for analysts and investors will be hosted today at 09.00 am. In order to join, please visit:

https://us02web.zoom.us/j/82830292832?pwd=RjJHVnZNQjJsdVVIRlVtd1hFMFZWZz09

Meeting ID: 828 3029 2832

Passcode: 382838

For further information:

Schroder Real Estate Investment Management Limited:
Nick Montgomery / Matthew Riley

020 7658 6000

FTI Consulting:

Dido Laurimore / Richard Gotla / Ollie Parsons

020 3727 1000

________________________________________________________________________________________________________________________________________________________

Interim Report and Condensed Consolidated Financial Statements

For the period 1 April 2021 to 30 September 2021

About Us

Schroder Real Estate Investment Trust Limited aims to provide shareholders with an attractive level of income together with the potential for income and capital growth through investing in UK commercial property.

Company Summary

Schroder Real Estate Investment Trust Limited (the 'Company' and together with its subsidiaries the 'Group') is a real estate investment company with a premium listing on the Official List of the Financial Conduct Authority and whose shares are traded on the Main Market of the London Stock Exchange (ticker: SREI).

The Company is a Real Estate Investment Trust ('REIT') and benefits from the various tax advantages offered by the UK REIT regime. The Company continues to be declared as an authorised closed-ended investment scheme by the Guernsey Financial Services Commission under section 8 of the Protection of Investors (Bailiwick of Guernsey) Law, 2020, as amended and the Authorised Closed-ended Investment Schemes Rules 2021.

Objective

The Company aims to provide shareholders with an attractive level of income and the potential for income and capital growth as a result of its investments in, and active management of, a diversified portfolio of UK commercial real estate.

The portfolio is principally invested in the three main UK commercial real estate sectors of industrial, office and retail, and may also invest in other sectors including mixed-use, residential, hotels, healthcare and leisure. The Company believes that a diversified portfolio by location, sector, size and tenant will outperform specialist strategies over the long term. Over the duration of the property market cycle, the portfolio aims to generate an above average income return with a diverse spread of lease expiries.

The Board has established a gearing guideline for the Investment Manager, which seeks to target debt, net of cash, at a level reflecting a loan to value of between 25% to 35%. This relatively low level of gearing is used to enhance income and total returns for shareholders with the level dependent on the property cycle and the outlook for future returns.

The dividend policy adopted by the Board is to pay a sustainable level of quarterly dividends to shareholders. The Board keeps the dividend policy under active review with a view to ensuring the Company can deliver a sustainable level of cover whilst having due regard to current and anticipated future market conditions. It is intended that the successful execution of the Company's strategy will enable a progressive dividend policy.

Investment strategy

The Company's strategy is to own and actively manage a diversified portfolio of properties located in the UK's Winning Cities and Regions. These locations are benefitting from higher economic growth resulting from structural changes such as urbanisation, rapid changes and growth of technology, changing demographics and social as well as positive impact themes. These locations have diversified local economies, sustainable occupational demand and favourable supply and demand characteristics. These properties offer good long-term fundamentals in terms of location, specification and sustainability performance, and are let at affordable rents, with the potential for income and capital growth due to good stock selection and asset management. We aim to grow income and enhance shareholder returns through good stock selection, active management and operational excellence.

Highlights

· NAV asset value ("NAV") total return of 11.3%² for the six months to 30 September 2021 (30 September 2020: -2.2%)

· Sustained outperformance of the real estate portfolio with a total return of 8.9% over the period versus the MSCI Benchmark Index of 7.7%

· Active asset management strategy, with 50 new lettings, renewals and reviews since 1 April 2021 which generated £2.4 million per annum of rental income and increased contracted rental income by £800,000 per annum

· 87% of the portfolio located in Winning Cities and Regions[i]

· 86% of the portfolio weighted to the industrial, office and retail warehouse sectors following post period end activity

· Loan to Value[ii] ('LTV'), net of cash, of 30.7%, increasing to 33.9% following post period end activity

Performance Summary

Property performance

	30 September 2021	30 September 2020	31 March 2021
Value of property assets and joint venture assets	£464.0m	£397.8m	£438.8m
Annualised rental income	£28.0m	£24.9m	£28.3m
Estimated open market rental value	£31.8m	£29.4m	£31.2m
Underlying portfolio total return	8.9%	-0.3%	4.6%
MSCI benchmark total return	7.7%	-1.3%	1.8%
Underlying portfolio income return	3.2%	3.2%	6.5%
MSCI Benchmark income return	2.1%	2.1%	4.4%

Financial summary

	Six months to 30 September 2021	Six months to 30 September 2020	Year to 31 March 2021
Net asset value ("NAV")	£323.4m	£296.8m	£296.8m
NAV per ordinary share	65.8p	58.0p	60.4p
EPRA Net Tangible Assets [iii]	£323.4m	£296.8m	£296.8m
Profit/(loss) for the period	£33.2m	(£8.8m)	£4.5m
EPRA earnings [iv]	£8.3m	£5.1m	£11.6m

Capital values

	30 September 2021	30 September 2020	31 March 2021
Share price	49.2p	32.3p	39.9p
Share price discount to NAV ⁴	(25.2%)	(44.3%)	(33.9%)
NAV total return ⁴	11.3%	(2.2%)	3.9%
FTSE All-Share Index	4,058.96	3,282.25	3,831.05

Earnings and dividends

	Six months to 30 September 2021		Six months to 30 September 2020	Year to 31 March 2021
IFRS earnings (pps)		6.8	(1.7)	0.9
EPRA earnings ⁴ (pps)		1.7	1.0	2.3
Dividends paid (pps)		1.33	0.39	1.59
Annualised dividend yield on 30 September/31 March share price ³		5.4%	2.4%	4.0%

Bank borrowings

30 September 2021

30 September 2020

31 March

2021

On-balance sheet borrowings [v]

£154.1m

£182.1m

£154.1m

Loan to Value ratio ("LTV"), net of all cash [vi]

30.7%

25.9%

32.3%

Ongoing charges

Six months to

30 Sept 2021

Six months to 30 Sept 2020

Year to

31 March 2021

Ongoing charges (including fund and property expenses) ⁶

2.3%

2.5%

Ongoing charges (including fund only expenses) ⁶

1.3%

1.4%

Chairman's Statement

Good progress delivering strategic objectives with improving shareholder returns and a positive outlook.

Overview

The UK economy has experienced a strong recovery over the interim period to 30 September 2021, with UK Gross Domestic Product ('GDP') growth of 7% expected for calendar 2021. The easing of pandemic restrictions has led to a surge in household consumption driven by pent-up demand and excess savings, as well as improved business sentiment. These factors, together with extraordinary levels of government and central bank support, have raised asset values and led to a sharp increase in activity levels across real estate occupier and investment markets.

This economic recovery, combined with a high level of activity at a portfolio level, has underpinned a 9% increase in the net asset value ('NAV') over the period to £323.4 million, or 65.8 pence per share ('pps'). Improving rent collection rates enabled the Company to increase dividends paid to 1.3 pps, resulting in a NAV total return of 11.3%. This compared favourably to a NAV total return over the financial year to 31 March 2021 of 3.9%.

The underlying portfolio continues to deliver strong performance compared with its peer group, with a total return of 8.9% compared with the MSCI Benchmark Index (the 'Benchmark') of 7.7% for the period. This was driven by a high portfolio industrial weighting, which has increased to 44% following a post period end industrial portfolio acquisition, a recovery in retail warehouse values and a higher income return of 3.2% versus the Benchmark at 2.1%. The portfolio is now ranked on the 9^th percentile of the Index since launch in 2004.

The portfolio's sustainability performance also continues to improve, reflected in an improved 2021 GRESB survey score. Demonstrating further improvement in the 2022 GRESB survey, alongside other sustainability-related activity, is a key strategic objective for both the Board and Manager.

Strategy

The strategy continues to focus on delivering sustainable income growth and improving the quality of the underlying portfolio though active management and capital investment, with a particular focus on delivering operational excellence and sustainability improvements.

Good progress has been made, with EPRA earnings of £8.3 million over the six-month period comparing with £11.6 million over the previous financial year. This was mainly due to improved rent collection rates that are now approaching pre-pandemic levels, and a reduction in bad debts as tenants repay historic arrears. This earnings growth enabled dividends to be increased over the period to £6.5 million, reflecting dividend cover of 127% based on EPRA earnings.

Reflecting our asset management capabilities and the portfolio's reversionary potential, 41 leasing transactions completed during the period. This led to a stable void rate of 5.1%, which is close to the historic low and reflects the quality and positive sector weightings of the underlying portfolio.

The positive activity continued post period end, with a high volume of ongoing leasing activity and planning consent granted for an 80,000 sq ft warehouse scheme in Stanley Green, Greater Manchester, which will be the first operational net zero warehouse in the region.

Finally, post period end the Company acquired a higher-yielding industrial portfolio for £19.9 million. This acquisition and other activity has supported a further 7.5% increase in the level of the next quarterly dividend

Sustainability

The Board and Investment Manager believe that focusing on environmental, social and governance ('ESG') considerations throughout the real estate lifecycle will deliver enhanced long-term returns for shareholders as well as a positive impact to the environment and the communities where the Company is investing. Alongside an improved GRESB score, the period saw increased capital investment to improve buildings' sustainability performance as well as ongoing asset level net zero analysis.

As set out in the year end results, the Board and Manager have agreed updated objectives relating to the portfolio's environmental and social characteristics, as well as in demonstrating good governance. These will be based upon the principles contained within the EU Sustainable Finance Disclosure Regulations, or 'SFDR', which requires complying companies to report on the extent to which climate and other sustainability risks are considered part of their investment consideration. The FCA is consulting on a similar regime for the UK and we would expect to align with this as part of developing our overall approach to demonstrating leadership in ESG. The Manager's report comments on progress against these objectives and a detailed assessment against the performance measures will be included in the Annual Report and Consolidated Accounts to 31 March 2022.

Share buybacks

In September 2020 the Company announced a share buyback programme due to the prevailing share price offering attractive value for shareholders. During the period the Company acquired 338,340 shares at an average price of 40.3 pence per share, bringing the total number of shares acquired since September 2020 to 27.4 million or £9.7 million. The share buyback programme has enhanced NAV and dividends per share, and contributed to an improvement in the share price rating. We will review the potential for further buybacks in the future, depending on movements in the share price and alternative uses for the Company's investment capacity.

Dividend

As noted above, due to improving rent collection rates and portfolio activity, the quarterly dividend increased over the period from 0.625 pps to 0.675 pps, resulting in total dividends paid of £6.5 million. This reflected dividend cover of 127% based on both EPRA earnings and on a cash basis. The Company has today announced a further 7.5% increase in the dividend to 0.726 pps, to be paid to shareholders in December 2021.

Debt

The Company has two loan facilities, a £129.6 million term loan with Canada Life and a £52.5 million revolving credit facility ('RCF') with Royal Bank of Scotland International ('RBSI'), of which £24.5 million was drawn at 30 September 2021. These facilities provide a low all-in average cost of debt of 2.4% and a blend of maturities in 2023, 2032 and 2039, reducing refinancing risk. In addition to the properties secured against the Canada Life and RBSI loan facilities, as at 30 September 2021 the Company had unencumbered property with a value of £39.4 million, and cash of £11.5[vii] million.

As noted above, since the period end the Company has acquired an industrial portfolio for £19.9 million, which will be funded by drawing a further £21.2 million on the RCF, increasing the total amount drawn to £45.7 million. Following this acquisition, and based on period end cash of £11.5⁷ million, the Company's Loan to Value ratio, net of cash, is 33.9%. This is within the long term strategic range of 25% to 35% and the Company continues to have significant headroom on all debt covenants.

Board succession

Having joined the Board in January 2014, in line with best practice I intend to retire as Chairman of the Company at the end of July 2022. Following a comprehensive succession planning process led by my fellow independent non-executive directors, Stephen Bligh and Graham Basham, I am pleased to confirm that Alastair Hughes, the current Senior Independent Director of the Company, will be appointed as Chairman with effect from 31 July 2022.

In anticipation of the appointment of Alastair Hughes as Chairman, a third party organisation has been appointed to conduct a search to identify a replacement Senior Independent Director of the Company.

The Investment Manager

On 2 June 2021, the Company announced a change to the Manager's fees which resulted in a saving of £162,000 over the financial period, and an annualised saving of approximately £650,000. The revised fee reflects 0.9% of net asset value per annum, with tiering providing scope for a further ad valorem fee reduction with growth of the Company. The fee includes investment management, asset management and accounting services and there is no performance fee.

The Board is pleased with the performance of the management team over the period and is confident that they have the necessary skills and resources to deliver on the future strategy.

On 1 October 2021, the Company separately announced the Manager's appointment as company secretary at a fixed fee of £50,000 per annum, replacing Northern Trust.

Outlook

The outlook for the UK real estate market is positive, with economic growth expected to continue, coupled with a supportive interest rate environment. Whilst we expect ongoing divergence in returns across the real estate market, with the industrial sector continuing to outperform over the short to medium term, the polarisation experienced over recent years is expected to narrow as more employees are encouraged to return to offices and sentiment continues to improve towards more resilient parts of the retail sector. Our diversified portfolio, and exposure to Winning Cities and Regions, means we are well positioned to benefit from these trends.

Whilst the outlook is positive, the UK recovery will need to absorb the gradual winding down of government support, and rising Covid-19 case rates over the winter could move the government to redeploy social distancing measures. Supply shortages and rising inflation have also created near-term headwinds that could weigh on activity in the coming months. Whilst this could be disruptive to the recovery, low interest rates and an abundance of capital seeking higher-yielding assets should support demand for good quality real estate.

Lorraine Baldry

Chairman

Schroder Real Estate Investment Trust Limited

22 November 2021

Investment Manager's Report

Growth in net income, ESG focus and sustained outperformance of the underlying portfolio

The Company's Net Asset Value ('NAV') as at 30 September 2021 was £323.4 million, or 65.8 pence per share ('pps'), which compared with £296.8 million, or 60.4 pps, as at 31 March 2021. This reflected an increase over the interim period of 5.4 pps, or 9%, with the underlying movement in the NAV per share set out in the table below:

		£m	pps
NAV as at 31 March 2021	296.8		60.4
Unrealised change in the valuations of the direct real estate portfolio and Joint Ventures		25.2	5.1
Capital expenditure (direct portfolio and share of Joint Ventures)		(0.7)	(0.1)
Net revenue		8.3	1.7
Dividends paid		(6.5)	(1.3)
Others		0.4	Nil
NAV as at 30 September 2021 (excluding the share buyback)		323.5	65.8
Share buyback		(0.1)	-
NAV as at 30 September 2021		323.4	65.8

The underlying portfolio, including joint ventures but excluding capital expenditure, increased in value by 5.7% over the six month period to September 2021. Adjusting for capital expenditure, the net capital value increase was 5.5%. The total return from the underlying portfolio, including rental income, was 8.9% which compared with the MSCI Benchmark (the 'Benchmark'), on a like-for-like basis, of 7.7%. This compares with a total return for the underlying portfolio for the full year to 31 March 2021 of 4.6%, which compared with the Benchmark of 1.7%.

Net revenue for the period totalled £8.3 million, or 1.7 pps, an increase of £3.2 million on the corresponding six month period to 30 September 2020 of £5.1 million. This increase has been driven by improved rental collection rates, the industrial acquisitions made in December 2020 and active asset management. During the period, dividends totalling £6.5 million were paid and 338,340 shares were repurchased at an average discount of 33% compared with the NAV at the start of the period. These factors, together with a general recovery in the UK real estate market, contributed to a NAV total return of 11.3% over the period.

Strategy

The strategic objectives are to:

- Deliver a progressive dividend policy together with attractive and sustainable NAV total returns;

- Maintain the long-term track record of outperformance of the underlying portfolio;

- Increase exposure to larger assets with strong fundamentals in higher growth locations;

- Actively manage the Company and its assets to maximise shareholder returns;

- Ensure ESG considerations are fully integrated and relevant to the strategy;

- Evolve the Company's active asset management approach to include a hospitality mindset and operational excellence; and

- Maintain a strong balance sheet with a loan to value within the long term target range of 25% to 35%.

The following progress has been made delivering against these objectives:

- 28% increase in underlying earnings over the six month period, supporting an 8% increase in the quarterly dividend paid between the December and June periods. Higher rent collection rates, portfolio activity and post period end acquisitions have supported a further 7.5% increase in the dividend relating to the quarter to 30 September 2021, to be paid in December 2021;

- Continued outperformance of the underlying portfolio, with a total return of 8.9% compared with the Benchmark of 7.7%. This outperformance was supported by a higher income return of 3.2% over the period compared with the Benchmark of 2.1%. The underlying portfolio has now outperformed over one, three, five, ten years and since the Company's IPO in 2004;

- Outperformance driven by active asset management with 50 new lettings, rent reviews and renewals completed since the start of the period totalling £2.4 million in annualised rental income, generating £800,000 per annum of additional rent above the previous level;

- Continued investment to deliver operational excellence in larger assets offering higher returns, with progress on key initiatives such as the 'Elevate' flexible office concept at City Tower in Manchester, planning consent secured for an operational net zero warehouse development at Stanley Green Trading Estate and leasing activity at St, John's Retail Park in Bedford;

- Positive movement in portfolio sector weightings which, following post period end activity, reflect 44% exposure to largely multi-let estates (Benchmark 31%), retail warehousing of 11% (Benchmark 9.0%) and good quality offices principally located in Winning Cities such as in London, Manchester and Edinburgh of 31% (Benchmark 26.1%);

- Enhanced ESG performance across the portfolio including an improvement in the 2021 GRESB score, further reductions in energy consumption, buildings improvements and occupier satisfaction initiatives; and

- Consolidated net Loan to Value of 30.7% at the period end, increasing to 33.9% following post period end activity. Average interest rate of 2.4% with a weighted loan term of 12.5 years at the period end.

Real estate market overview

The UK real estate market has experienced a strong recovery over the period due to the easing of pandemic restrictions and the resultant improvement in consumer and business sentiment. This led to average capital values for UK commercial real estate increasing by 5.3% over the period which compared with a 3.5% decline over the year to 31 March 2021. Although Government measures protecting tenants for non-payment of rent remain in place, income collection rates are returning to pre-pandemic levels across industrial and office assets with improving levels across more resilient parts of the retail and leisure market. The positive market momentum should continue with average total returns for calendar 2021 expected to be approximately 15%.

Following post period end activity the Company's exposure to the industrial sector is 44%, an increase from 30% 12 months ago and comparing favourably with the Benchmark of 31%. As expected, the industrial sector delivered the strongest returns over the period, with average values increasing by 13.3%, the highest six month increase recorded for the sector. Strong investor demand has driven average industrial income yields down to 3.8%, which compares with the average income yield for UK real estate of 4.4%. Whilst we expect the tailwinds driving occupational demand to continue, the rate of capital growth is expected to slow as on-line sales growth slows and new development activity increases. This has led the Company to focus on higher yielding, multi-let industrial assets, where new supply is more restricted and where value can be added through active management. This approach resulted in the Company's industrial portfolio producing a total return of 15.7% over the period (Benchmark 15.4%), supported by a higher income return of 2.8% (Benchmark 1.9%) and rental value growth of 4.2% (Benchmark 3.5%).

Following post period end activity the Company's exposure to the retail sector, including where retail is ancillary to the main use, reduced to 18.9% compared with the Benchmark of 22.3%. A key change over the period has been improved sentiment towards the retail warehouse sector, with average capital values increasing by 7.5%. This compared with capital values for the retail sector as a whole rising by 2.6%, dragged down by shopping centres and secondary high street assets. This is due to the retail warehouse sector complementing multi-channel retail strategies such as click-and-collect and home delivery, combined with increased demand from food and homeware occupiers. The Company is benefiting from this recovery due to 77% of single use retail exposure being invested in retail warehousing. To illustrate, positive leasing activity at St. John's Retail Park in Bedford, the Company's largest retail asset, resulted in a capital value increase of 10.9% (Benchmark 5.5%) over the period which compared with -8.6% (Benchmark -2.5%) over the 12 month period to 31 March 2021.

Following post period end activity, the Company's exposure to the office sector is 31% compared with the Benchmark of 26.1%. Uncertainty as office tenants reassess their requirements weighed on the sector with average capital values rising by 0.8% over the period. Whilst this led to take-up over the first half of 2021 being 49% below the pre-pandemic average, vacancy rates have stabilised in Central London and prime office rents in Leeds, Manchester and the West End are increasing. This reflects a polarisation with healthy demand for well specified offices in city centres and close to leading universities, which enable companies to attract highly qualified staff. In contrast, more secondary offices, particularly in out of town locations, are vulnerable to weakening demand, functional obsolescence and rising refurbishment costs.

Alongside a focus on office accommodation offering strong sustainability credentials, occupiers increasingly require higher service levels and greater levels of flexibility. We are therefore evolving our active management approach to a hospitality mindset and are offering tenants greater levels of flexibility and service levels. This approach to operational excellence is best illustrated at City Tower in Manchester, where our 'Elevate' flexible working concept is capturing post-pandemic demand and delivering materially higher net rents.

Real estate portfolio

As at 30 September 2021 the portfolio comprised 39 properties valued at £464.0 million, excluding lease incentives, increasing to 43 assets and £483.9 million following the post period end industrial portfolio acquisition. This includes the Company's share of joint venture properties at City Tower in Manchester and the University of Law in Bloomsbury, London.

Following the post period end acquisitions, the portfolio generates rental income of £30.2 million per annum, reflecting a net initial income yield of 5.8%, which compares with the MSCI Benchmark (the 'Benchmark') of 4.3%. The portfolio also benefits from fixed contractual annual rental uplifts of £1.5 million over the next 24 months. The independent valuers' estimate that the current rental value of the portfolio is £33.5 million per annum, reflecting a reversionary income yield of 6.9%, which compares favourably with the Benchmark at 4.9%. The Company's void rate is approximately 5%, calculated as a percentage of estimated rental value, with a weighted average lease length, calculated to the earlier of lease expiry or break, of 5.2 years.

The data tables below summarise the portfolio information as at 30 September 2021, including the post period end acquisitions. The weightings and property values presented within the tables below combine period end valuations as determined by the Property Valuers as at 30 September 2021, with transactional information for the post period end industrial portfolio acquisition as detailed in the 'Industrial portfolio acquisition' section on page 15 of the 2021 Interim Report and Condensed Consolidated Financial Statements.

	Weighting (% of portfolio post period end acquisitions)
Sector weightings by value	SREIT	Benchmark
South East	11.3	19.5
Industrial Rest of UK	32.5	11.5
Industrial	43.8	31.0
City	0.0	3.6
Mid-town and West End	8.1	7.5
Rest of South East	5.4	7.9
Office Rest of UK	17.4	7.2
Offices	30.9	26.1
Retail warehouse	11.1	9.0
South East	0.8	6.9
Rest of UK	7.0	3.8
Shopping centres	0.0	2.6
Retail - Retail ancillary to main use - Retail single use	7.8 4.5 3.3	13.3 - -
Other	6.4	20.6

	Weighting (% of portfolio post period end acquisitions)
Regional weightings by value	SREIT	Benchmark
Central London[viii]	8.1	19.4
South East excluding Central London	19.3	31.9
Rest of South	10.2	13.8
Midlands and Wales	23.2	11.9
North	36.7		13.0
Scotland	2.4		4.1
Northern Ireland	0.0		0.2

The top ten properties, including post period end acquisitions and the share of the joint venture properties at City Tower in Manchester and Store Street in Bloomsbury, are set out below and comprise 65% of the portfolio value:

Top ten properties		Value (£m)	(% of portfolio post period end acquisitions)
1	Milton Keynes, Stacey Bushes Industrial Estate	50.5	10.4
2	Leeds, Millshaw Industrial Estate	47.7	9.9
3	Manchester, City Tower (25% share)	40.3	8.3
4	London, The University of Law (50% share)	39.4	8.1
5	Bedford, St John's Retail Park	29.5	6.1
6	Leeds, Headingley Central	23.9	4.9
7	Chippenham, Langley Park Industrial Estate	22.8	4.7
8	Norwich, Union Park Industrial Estate	22.5	4.6
9	Cheadle, Stanley Green Trading Estate	20.3	4.2
10	Uxbridge, 106 Oxford Road	15.4	3.2
	Total as at 30 September 2021 (including post period end industrial portfolio acquisition)	312.3	64.4

The Company's income is diverse with 308 tenants of which the Company's largest and top ten tenants represent 6.5% and 25.6% of the portfolio as a percentage of annual rent:

Top ten tenants		Rent p.a. (£m)	(% of portfolio post period end acquisitions)
1	University of Law Limited	2.00	6.5
2	Buckinghamshire New University	1.15	3.7
3	Siemens Mobility Limited	0.97	3.1
4	The Secretary of State	0.88	2.8
5	Matalan Retail Limited	0.57	1.9
6	Express Bi Folding Doors Limited	0.54	1.8
7	TJX UK Limited T/A Homesense	0.51	1.6
8	Jupiter Hotels Limited T/A Mercure	0.46	1.5
9	Premier Inn Hotels Limited	0.42	1.4
10	Lidl	0.42	1.3
	Total as at 30 September 2021 (including the post period end industrial portfolio acquisition)	7.92	25.6

The diverse and granular underlying rental income, and a high level of occupier engagement, has supported improving rent collection rates with 98% of the contracted rents collected for the quarter to 31 December 2021. The breakdown between sectors is 99% of office rent collected, 97% of industrial rent collected and 95% of retail, leisure and other rent collected. The Company remains in active dialogue with its tenants for historic arrears which currently total £2.3 million, of which £850,000 is categorised as bad debt.

Portfolio performance

As noted above, the underlying portfolio continues to outperform the MSCI Benchmark. The table below shows performance to 30 September 2021:

SREIT total return

MSCI Benchmark total return

Relative

Period to 30 September 2021

Six months

(%)

One year

(%)

Three years

(% p.a.)

Since IPO [ix]

(% p.a.)

Six months

(%)

One year

(%)

Three years

(% p.a.)

Since IPO

(% p.a.)

Six months

(%)

One year

(%)

Three years

(% p.a.)

Since IPO

(% p.a.)

Office

+2.6

+4.6

+4.8

+7.7

+3.1

+3.0

+2.7

+7.1

-0.5

+1.6

+2.1

+0.6

Industrial

+15.7

+29.4

+15.3

+10.5

+15.4

+28.9

+13.5

+9.6

+0.3

+1.5

+0.8

Retail

+6.8

+7.9

-3.3

+4.1

+5.8

+4.4

-4.4

+3.4

+1.0

+3.3

+1.1

+0.7

Other

+17.6

+13.6

-0.9

+2.9

+4.4

+5.6

+3.3

+7.3

+12.7

+7.6

-4.0

-4.2

All sectors

+8.9

+14.3

+6.0

+7.5

+7.7

+11.1

+3.6

+6.3

+1.1

+2.9

+2.4

+1.1

Transactions and asset management

Below are examples of acquisitions and ongoing active management initiatives that should support continued outperformance of the underlying portfolio.

Industrial portfolio acquisition

Post period end acquisition of a portfolio of four industrial assets in the north west of England. The purchase price of £19.85 million reflects a net initial yield of 6.9% and a capital value of £53 per sq ft.

Valley Road Industrial Estate, Birkenhead

Unconditional contracts have been exchanged to acquire Valley Road Industrial Estate in Birkenhead, for £11.4 million, reflecting a net initial yield of 6.8%, a reversionary yield of 7.8% and a low average capital value of £60 per sq ft. The 10 acre estate comprises 190,000 sq ft of warehouse space and ancillary offices across 15 units, of which approximately 40% by Estimated Rental Value ('ERV') have been recently refurbished.

The estate is located close to Junction 1 of the M53 and features a manned secure access, low site cover and good circulation. With an EPC rating of C, it offers the opportunity to improve sustainability credentials through initiatives including upgrades to LED lighting, installation of PIR sensors and improvements to insulation.

The estate is let to seven tenants generating a combined rent of £830,000 per annum, reflecting a low average rent of £4.36 per sq ft. This compares with an ERV of £950,000 per annum, or £4.99 per sq ft. Tenants include KPFF Limited, a frozen food distribution production company, at £300,000 per annum or 36% of total income; Balfour Beatty, an international infrastructure company, at £247,200 per annum or 29% of total income; and Park Retail, a gift and voucher distribution company, at £85,910 per annum or 10% of total income. The weighted average unexpired lease term is 4.3 years to earliest termination and approximately 10% of the estate is vacant, where the refurbishment has just been completed and where there is a 12 months rental guarantee. The majority of this space has good tenant interest.

Coral Products, Haydock Industrial Estate, Haydock

Acquisition of a 98,551 sq ft manufacturing and recycling facility on Haydock Industrial Estate, which is leased to Coral Product (Mouldings) Limited ("Coral"). The purchase price of £4.9 million reflects a net initial yield of 6.6% and a low capital value of £49 per sq ft. Coral, who were recently acquired by a subsidiary of the Canada-based IPL Plastics Group, occupy the entire site on a lease expiring in January 2031, with a tenant break in 2026, at a rent of £340,000 per annum or £3.45 per sq ft. This compares with an ERV of £394,000 per annum or £4.00 per sq ft. The asset is well located with direct access to the A580 (East Lancashire Road) and in turn the M6 motorway.

The unit benefits from a new roof across the majority of the building. The tenant is understood to be committed to the site due to recent investment and the recycling licence, but there may be potential to acquire adjoining sites and pursue a longer term redevelopment strategy.

Newfield Fabrications, Sandbach, Cheshire

Acquisition of two assets let to Newfield Fabrications ("Newfield"), a steel fabricating business established in 1965, for a combined £3.6 million, which reflects a net initial yield of 7.4% and a low capital value of £42 per sq ft. Both assets are in an established industrial area in Sandbach, Cheshire, approximately three miles from junction 17 of the M6.

The first asset comprises a 77,880 sq ft manufacturing and distribution facility on a 4.1 acre site, let on a 13.9 year term at a rent of £247,000 per annum, or £3.17 per sq ft. The lease benefits from five yearly rent reviews linked to the retail price index ("RPI"), subject to a minimum increase of 2% per annum and a cap of 4% per annum. The facility has an EPC rating of C and features photo-voltaic panels.

The second asset comprises an 8,000 sq ft industrial unit with main road frontage, also let for 13.9 years at a rent of £36,000 per annum, or £4.50 per sq ft. The lease also benefits from five yearly rent reviews linked to the RPI, subject to a minimum increase of 2% per annum and a cap of 4% per annum. The property has an EPC rating of C.

Cheadle, Stanley Green Trading Estate (Industrial)

Asset strategy

Stanley Green Trading Estate in Cheadle, Greater Manchester was acquired in December 2020 for £17.3 million. The strategy for 2021 was to crystallise higher rents on the trading estate and secure planning consent for an 80,000 sq ft, Net Zero Carbon ("NZC") scheme, on the adjoining 3.4 acre site.

Asset overview and performance

Stanley Green Trading Estate comprises 150,000 sq ft of trade counter, self-storage and warehouse accommodation with an adjoining development 3.4 acre site. As at 30 September 2021, the asset was valued at £20.3 million reflecting a net initial income yield of 4.3% and a reversionary yield of 5.0% (5.5% and 6.3% respectively excluding the value attributable to the non-income producing development site). Over the period the asset delivered a total return of 15.5%.

Key activity

- Stockport Metropolitan Borough Council's planning committee unanimously resolved to grant planning permission for 80,000 sq ft of operational Net Zero Carbon ("NZC") accommodation on the development site on 30 September 2021. The Company will now progress the development of 11 warehouse and trade units at a cost of approximately £8 million which is scheduled to complete in Q4 2022. The target rental value income to be generated is £950,000 per annum or £11.86 per sq ft, with pre-lets targeted during the construction phase.

- At the existing trading estate, a five year lease renewal completed with Factory Kitchens for a 2,859 sq ft unit at a rent of £40,026 per annum, or £14.00 per sq ft. This compares with the previous rent of £8.75 per sq ft and represents an uplift of £15,010 per annum, or 60.0%. This compares with the average rent across the trading estate of £6.32 per sq ft.

- Negotiations are progressing with a number of occupiers to regear their leases across the trading estate which should support continued income growth.

Chippenham, Langley Park Industrial Estate (Industrial)

Asset strategy

Langley Park Trading Estate in Chippenham was acquired in December 2020 for £19.3 million. The strategy for 2021 was to drive net income growth through a key lease renewal with Littlefuse (19.6% income on acquisition) and a rent review with Siemens (53.4% income on acquisition) to increase the rental income, WAULT and quality of accommodation across the estate.

Asset overview and performance

Langley Park Industrial Estate is a multi-let industrial estate comprising 400,000 sq ft of warehouse and ancillary office accommodation on a large site of 28 acres located close to Chippenham town centre. As at 30 September 2021, the asset was valued at £22.8 million reflecting a net initial income yield of 6.9% and a reversionary yield of 7.6%. Over the period the asset delivered a total return of 18.9%.

Key activity

- Negotiations ongoing with Littlefuse to extend their lease term from December 2022 for ten years.

- Negotiations continuing with Siemens on the outstanding June 2021 rent review with the objective of agreeing a new longer lease.

- Given the positive discussions with occupiers who have expressed an interest in additional accommodation, a masterplan has been prepared that could see up to 130,000 sq ft of additional warehouse accommodation built at the site. A pre planning application has been submitted in relation to this proposal.

Bedford, St. John's Retail Park (Retail Warehouse)

Asset strategy

The strategy for 2021 was to let the vacant units, improve retailer mix and retain tenants by negotiating new longer term leases.

Asset overview and performance

St. John's Retail Park comprises a 130,000 sq ft retail warehouse scheme underpinned by income from covenants including Lidl, Home Bargains, TK Maxx and Costa with an average lease term, to the earlier of lease expiry of break, of seven years. The asset benefits from an affluent catchment and has good parking. As at 30 September 2021, the asset was valued at £29.5 million reflecting a net initial income yield of 6.2% and a reversionary yield of 6.0%. Over the period the asset delivered a total return of 14.3%.

Key activity

- Lidl and Home Bargains have reported strong trading figures since opening in late 2020. Both retailers have traded throughout the pandemic and driven high volumes of footfall, supporting the attraction of new occupiers and the retention of existing occupiers.

- Following the completion of these lettings and the resultant boost in footfall, a vacant 9,919 sq ft unit has been let to Bensons for Beds at £130,000 per annum, or £13.00 per sq ft. This is in line with the ERV as at 30 March 2021, with the tenant receiving 15 months' incentive.

- Further activity over the interim period included a five year lease renewal completed with Carpetright for a 9,970 sq ft unit at a rent of £150,000 per annum, or £15.00 per sq ft, with regear discussions ongoing with Tapi, Hobbycraft and Halfords.

- The remaining vacant unit at St. John's Retail Park is under offer at a rental level above the ERV as at 30 September 2021.

Manchester, City Tower (Mixed-Use Office, statistics below reflect SREIT 25% Share)

Asset strategy

The office strategy for 2021 was to lease vacant office space through conventional lettings as well as through the 'Elevate' flexible working concept. The strategy for the retail, leisure and hotel space was to improve tenant mix and explore mutually beneficial regears. There is also a rolling refurbishment strategy ongoing to ensure the building captures occupier demand and delivers improved sustainability performance.

Asset overview and performance

City Tower comprises 610,000 sq ft of office, retail, leisure and hotel accommodation located on a three acre island site in a core location. As at 30 September 2021, the asset was valued at £40.3 million reflecting a net initial income yield of 5.8% and a reversionary yield of 6.9%. Over the period the asset delivered a total return of 3.2%.

Key activity

- The first phase of the Elevate flexible working concept has completed, including delivery of a 28^th floor tenant lounge which includes an event space and three shared meeting rooms. 89% of the completed Elevate office suites are now let or under offer on terms ahead of the asset business plan.

- A new five year lease has exchanged with Oodle Financial Services Limited, an existing tenant, for an additional 9,181 sq ft unit at a gross office rent (including service charge and fit-out rent) of £103,286 per annum, or £45.00 per sq ft. As part of this lease agreement the Company will undertake refurbishment works to deliver the suite in line with the Elevate fit out. The net office rent (excluding service charge and fit-out rent) equates to £63,647 per annum, or £27.73 per sq ft. This compares with the previous passing rent of £22.50 per sq ft, reflecting a net uplift of 23.2%.

- A new five year lease has also completed with MAPP, an existing tenant, following surrender of their existing unit, for 2,647 sq ft at a gross office rent (including service charge and fit-out rent) of £29,117 per annum, or £44.00 per sq ft. This unit was refurbished as part of the first phase of the Elevate concept. The net office rent (excluding service charge and fit-out rent) equates to £16,656 per annum, or £25.17 per sq ft. This letting was 17.1% ahead of the 30 June 2021 ERV. Further lettings at City Tower are expected to complete shortly.

- The 12^th, 13^th and 20^th floor space leased to the previous management workspace operator has been surrendered and a phased refurbishment will be carried out and launched as additional Elevate flexible space.

- Good progress is being made letting the ground floor leisure and retail space. Namii has taken a lease for ten years on the 2,973 sq ft sq ft unit. The rent payable is the higher of base rent or 2.5% of gross turnover capped at £25,000 per annum. The base rent is set at the higher of £10,000 per annum or 75% of the turnover rent in year one, reviewed annually. The tenant will receive 12 months' rent free plus 16 months' half rent. Additionally, a new ten year lease has completed for a ground floor retail/leisure unit with Min Kee, an Asian grab-and-go operator, for a 1,002 sq ft unit at a rent of £14,375 per annum, or £57.39 per sq ft. This compares with the previous passing rent of £39.82 per sq ft and represents an uplift of £4,400 per annum or 44.1%. The letting was 36.9% ahead of the ERV as at 30 March 2021. The tenant will receive three months' rent free.

Responsible investing with impact

Sustainability and responsible investment are integral to the Company's investment process. We believe that understanding, managing and measuring the impact of Environmental, Social and Governance ('ESG') considerations, will deliver enhanced long-term returns for shareholders and positively impact the environment and the communities where the Company is investing.

In November 2020, the Company issued a Sustainability Guide which sets out how sustainability considerations, risks and opportunities are integrated within the investment process. This was followed in December 2020 by Schroders as manager publishing its own 'Pathway to Net Zero Carbon' by 2050. The Company will publish its own Net Zero Carbon pathway by the end of the current financial year.

Continued progress has been made during the period with the Company improving its GRESB score from 71 to 75 (out of 100), and retaining its three star rating in the GRESB sustainability survey. The Company also achieved a GRESB Public Disclosure A Rating for the second consecutive year and the EPRA Best Practice Sustainability Reporting Gold Award for the fourth consecutive year.

At the end of March 2021, the Board and Manager agreed updated sustainability objectives for the Company including details of how performance will be monitored. The below table comments on progress against these objectives and a full assessment against the performance measures will be given in the financial year report and accounts to 31 March 2022.

Objective	Management Strategy	Interim Progress
Governance and Oversight	The Manager's process includes oversight on sustainability by its Investment Committee and Group Investment Risk Committee. The Board reviews the objectives and progress of the sustainability programme at least annually. This includes maintaining good health & safety and managing compliance with regulations.	We continue to incorporate sustainability considerations into the investment process including acquisition proposals, annual asset business plans and annual Fund strategy statements. The Investment Committee continues to review each of these steps and sustainability risks are to be included as part of Q3 2021 reporting to the Group Investment Risk Committee. The external Property Managers continue to ensure asset level operational, environmental, health and safety compliance is maintained and reports are made to the Manager.
Net Zero Carbon ('NZC')	Determine portfolio alignment with NZC and Paris Agreement to limit climate change to 1.5C. Asset analysis to determine energy/carbon targets and offsetting. Determine new energy and carbon targets to 2022, 2025 and 2030 through Impact and Sustainability Action Plans (ISAPs) for buildings to assess understanding of improvement and opportunities and Net Zero analysis to enable target setting. Improve collaboration with occupiers to support whole building performance. Assess 'whole life carbon' on major projects. Use Schroders Refurbishment and Development brief on projects to set and manage ambitions. Use NABERS UK Design for Performance to support improved operational in-use outcomes. Procure 100% landlord-controlled electricity on certified green tariffs by 2022 (December 2020 at 97%). Assess potential for onsite renewable energy generation. Purchase independently verified offsets that align with best practice industry guidance. Reduce the use of offsets to zero over appropriate time frame.	Impact and Sustainability Action Plans (ISAPs) completed for all managed assets where the Company retains operational control. The ISAPs feed into the asset and Company Net Zero Carbon (NZC) pathway. Development of this pathway is underway to be published in the current financial year alongside new energy and carbon targets for the Company.
Third Party Verification	GRESB - Continue to target opportunities to improve the GRESB score year on year. Data Assurance - Continue to obtain third party assurance of sustainability data in line with the independent assurance process. Asset Certification - Obtain third party certification to validate Net Zero Carbon or related energy/carbon efficiency claims or health and wellbeing. EPRA Reporting - Maintain EPRA Gold Sustainability Best Practice Reporting Award. SDG alignment - Integrate into annual reporting for 2022 by mapping social and environmental contributions to the Schroder Real Estate Investment Management Limited ('SREIM') Pillars of Impact and UN SDGs and set targets for improvement.	The Company achieved a Three Star rating in the 2021 GRESB sustainability assessment with a score of 75 (out of 100). The Company also achieved a GRESB Public Disclosure 'A' Rating for the second consecutive year. The Company achieved the EPRA Best Practice Sustainability Reporting Gold Award for the fourth consecutive year.
Climate Risk and TCFD	Determine a climate risk profile, adaptation strategy and reporting in line with TCFD through asset and portfolio scenario analysis.	Transition Risk: We are assessing all managed assets against Paris Aligned 1.5°C carbon and energy intensity performance benchmarks, to the year 2050 using the Carbon Risk Real Estate Monitor ('CRREM') tool. Physical Risk: We licence a proprietary physical risk database through a third-party provider. The tool assesses vulnerability to physical risk hazards, including those related to climate change.
Operational excellence	Set standards for operational excellence for managed assets incorporating the hospitality mindset in our strategy at each asset. Improve BREEAM In-Use ('BIU') certification across the portfolio to support improvement across nine aspects: Management, Health and Wellbeing, Energy, Transport, Water Resources, Resilience, Land Use and Ecology and Pollution. Improve the EPC profile of the portfolio through asset management including refurbishment. Potential to adopt NABERS Energy for Offices which rates base building actual energy efficiency. Assess the approach to monitor indoor environment quality (IEQ) and set new standard. Promote and facilitate our occupiers' use of bicycles, buses and electric vehicles as transport methods to our assets. Minimise water demand in line with best practice industry benchmarks. Provide dedicated space for waste/recycling segregation and storage. Integrate biophilic design into assets.	We continue to develop the approach to operational excellence for all managed assets. In January 2021, we commissioned an occupier satisfaction survey across the portfolio's tenant base to better understand occupier requirements. As part of this project, we have worked alongside the external Property Managers to develop an action plan to improve the relationship with occupiers. We have continued to explore opportunities to improve asset level sustainability performance and, through applying the ISAP process, has identified improvements which it is working with the Property Managers to implement. This includes rolling out of Automatic Meter Reading ("AMR") devices across landlord utility supplies, enhancement to biodiversity (for example, native landscaping and bird boxes) and improvements to sustainable transport facilities (for example, electric vehicle charging points, cycle storage and shower and changing facilities).

Finance

The Company has two loan facilities, a £129.6 million term loan with Canada Life and a £52.5 million revolving credit facility ('RCF') with Royal Bank of Scotland International ('RBSI'), of which £24.5 million was drawn at 30 September 2021. In addition to the properties secured against the Canada Life and RBSI loan facilities, the Company has unsecured properties with a value of £39.4 million and cash of £11.5^{^[x]} million. This resulted in a Loan to Value ratio, net of cash, of 30.7%.

Since the period end the Company has acquired three industrial assets for £19.9 million, which will be funded by drawing a further £21.2 million on the RCF, increasing the total amount drawn to £45.7 million. Following these acquisitions, and based on current cash of £11.5¹⁰ million, the Company's Loan to Value ratio, net of cash, is 33.9%, which is within the long term strategic range of 25% to 35%. The Company continues to have significant headroom on all debt covenants.

£129.6 million term loan with Canada Life

The loan is fully compliant with all covenants as summarised below:

Lender

Loan (£m)

Maturity

Total Interest rate (%)

Asset Value (£m)

Loan to Value ('LTV') ratio[xi] (%)

LTV ratio covenant (%)

Interest cover ratio ('ICR') (%)[xii]

ICR ratio covenant (%)

Projected Interest cover ratio (%)[xiii]

Projected ICR ratio covenant (%)

Canada Life Term Loan

129.6

50%: 15/10/2032

50%:

15/10/2039

2.5[xiv]

290.8

44.6

(44.6 net of cash in facility)

563

185

441

185

The Company has significant headroom with LTV and ICR covenants summarised below:

· Net LTV on the secured assets against this loan is 44.6%. On this basis the properties charged to Canada Life could fall in value by 31% prior to the 65% LTV covenant being breached;

· The interest cover ratio is 563% based on actual net rents for the quarter to September 2021. A 67% fall in net income could be sustained prior to the loan covenant of 185% being breached; and

· After utilising available cash and uncharged properties, the valuation and actual net rents could fall by 45% and 76% respectively prior to either the LTV or interest cover ratio covenants being breached.

£52.5 million revolving credit facility ("RCF") with RBSI

At 30 September 2021, £24.5 million of the £52.5 million RCF was drawn. The loan is fully compliant with its covenants as summarised below:

Lender	Loan/ amount drawn (£m)	Maturity	Total Interest rate (%)	Asset Value (£m)	Loan to Value ('LTV') ratio[xv] (%)	LTV ratio covenant (%)	Interest cover ratio ('ICR') (%)[xvi]	ICR ratio covenant (%)	Projected Interest cover ratio (%)[xvii]	Projected ICR ratio covenant (%)
RBS RCF	52.5[xviii] / 24.5	03/07/2023	1.7[xix]	133.8	18.3	65[xx]	1153	250	1,079	250

The RBSI loan has an interest rate cap for £32.5 million and comes into effect if GBP 3 month SONIA reaches 1.5%. The Company has significant headroom within its LTV and ICR covenants which are summarised below assuming loan security is granted over the three industrial assets:

· Net LTV on the secured assets against this loan is 18.3%. On this basis the properties charged to RBSI could fall in value by 88% prior to the 65% LTV covenant being breached, although while the Company is holding the balance drawn in cash, no breach of the LTV covenant would occur; and

· The interest cover ratio is 1,153% based on actual net rents. A 78% fall in net income could be sustained prior to the loan covenant of 250% being breached.

· As noted above, post period end the Company will draw down a further £21.2 million on the RCF, increasing the total amount drawn to £45.7 million. Charging these assets to the RBS RCF facility will have the following impact on the loan and its covenants:

Lender	Loan/ amount drawn (£m)	Maturity	Total Interest rate (%)		Asset Value (£m)	Loan to Value ('LTV') ratio[xxi] (%)	LTV ratio covenant (%)	Interest cover ratio ('ICR') (%)[xxii]	ICR ratio covenant (%)	Projected Interest cover ratio (%)[xxiii]	Projected ICR ratio covenant (%)
RBS RCF	52.5[xxiv] / 45.7	03/07/2023		1.7[xxv]	153.7	29.7	65[xxvi]	1015	250	962	250

Given the increase in the RCF and the maturity in July 2023, consideration is being given to refinancing options which may include an increase in the RCF capacity.

Outlook

Good progress has been achieved over the period in delivering the strategy against the backdrop of improving market conditions, with the outcome being healthy NAV growth, sustained outperformance of the underlying portfolio and further increases in the level of dividend.

Whilst the focus is on growing net income and dividends, we are also investing in existing assets to maximise returns and ensure the portfolio remains resilient in response to structural changes and evolving occupier trends. A key part of this is evolving our approach to delivering operational excellence for occupiers as well as demonstrating continued improvements in sustainability performance.

Whilst we are alert to the risks of an increase in Covid-19 case rates over the winter, and the possibility of more persistent inflation leading to higher interest rates, the momentum in the broader economy and high yield offered by the real estate sector means we are positive about the outlook for the Company.

Nick Montgomery

Fund Manager

22 November 2021

Responsibility Statement of the Directors in respect of the Interim Report

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting; and

• the interim management report (comprising the Chairman's and the Investment Manager's report) includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

We are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, and for the preparation and dissemination of financial statements. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

By order of the Board

Lorraine Baldry

Chairman

22 November 2021

Independent Review Report to Schroder Real Estate Investment Trust Limited

Conclusion

We have been engaged by Schroder Real Estate Investment Trust Limited (the "Company") and its subsidiaries (together the "Group") to review the Condensed Consolidated Financial Statements in the Interim Report and Consolidated Financial Statements for the six months ended 30 September 2021 which comprises the Unaudited Condensed Consolidated Statement of Comprehensive Income, Unaudited Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated Statement of Cash Flows, and the related Notes 1 to 16. We have read the other information contained in the Interim Report and Consolidated Financial Statements and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Condensed Consolidated Financial Statements.

Based on our review, nothing has come to our attention that causes us to believe that the Condensed Consolidated Financial Statements for the six months ended 30 September 2021 are not prepared, in all material respects, in accordance International Accounting Standard 34 "Interim Financial Reporting" and the Disclosure Guidance and Transparency Rule of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board ("ISRE 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in Note 1, the Annual Report and Consolidated Financial Statements of the Group are prepared in accordance with International Financial Reporting Standards. The Condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".

Responsibilities of the Directors

The Directors are responsible for preparing the Interim Report and Condensed Consolidated Financial Statements in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Auditor's Responsibilities for the review of the financial information

In reviewing the Interim Report and Condensed Consolidated Financial Statements, we are responsible for expressing to the Company a conclusion on the Condensed Consolidated Financial Statements. Our conclusion, is based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board ("ISRE 2410"). To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

Guernsey, Channel Islands

22 November 2021

The maintenance and integrity of the Company's website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Condensed Consolidated Statement of Comprehensive Income

		Six months to	Six months to	Year to
		30/09/2021	30/09/2020	31/03/2021
	Notes	£000	£000	£000
		(unaudited)	(unaudited)	(audited)
Rental income		11,832	10,288	21,458
Other income		270	139	205
Property operating expenses		(806)	(1,724)	(3,038)
Net rental and related income, excluding joint ventures		11,296	8,703	18,625

Share of total net income in joint ventures		1,583	1,276	2,452
Net rental and related income, including joint ventures		12,879	9,979	21,077

Gain/(loss) on disposal of investment property		-	-	121

Net unrealised valuation gain/(loss) on investment property	6	24,689	(13,500)	(8,286)

Expenses
Investment management fee	2	(1,397)	(1,449)	(2,906)
Valuers' and other professional fees		(759)	(768)	(1,698)
Administrator's fee	2	(60)	(60)	(120)
Auditor's remuneration		(102)	(83)	(150)
Directors' fees		(75)	(75)	(150)
Other expenses		(161)	(158)	(278)
Total expenses		(2,554)	(2,593)	(5,302)

Net operating profit/(loss) before net		33,431	(7,390)	5,158
finance costs

Interest receivable		-	74	-
Finance costs		(2,041)	(2,342)	(4,203)
Net finance costs		(2,041)	(2,268)	(4,203)
Share of total net income in joint ventures	7	1,583	1,276	2,452
Share of net valuation profit/(loss) in joint ventures	7	224	(394)	1,135
Profit/(loss) before taxation		33,197	(8,776)	4,542
Taxation	4	-	-	-
Profit/(loss) and total comprehensive income for the period attributable to the equity holders of the parent		33,197	(8,776)	4,542
Basic and diluted earnings per share		6.8p	(1.7p)	0.9p

All items in the above statement are derived from continuing operations. The accompanying notes 1 to 16 form an integral part of the condensed interim financial statements.

Condensed Consolidated Statement of Financial Position


	Notes	30/09/2021 £000		30/09/2020 £000		31/03/2021 £000
		(unaudited)		(unaudited)		(audited)
Investment property	6	377,301		313,083		351,776
Investment in joint ventures	7	79,964		77,591		79,120
Non-current assets		457,265		390,674		430,896

Trade and other receivables	8	19,117		18,535		17,028
Cash and cash equivalents	9	10,626		78,675		12,175
Current assets		29,743		97,210		29,203
Total assets		487,008		487,884		460,099

Issued capital and reserves		359,472		325,482		332,811
Treasury shares		(36,103)		(28,708)		(35,967)
Equity		323,369		296,774		296,844

Interest-bearing loans and borrowings	10	153,510		181,351		153,370
Lease liability	6	1,987		2,412		1.988
Non-current liabilities		155,497		183,763		155,358

Trade and other payables	11	8,142		7,347		7,897
Current liabilities		8,142		7,347		7,897

Total liabilities		163,639		191,110		163,255

Total equity and liabilities		487,008		487,884		460,099

Net Asset Value per ordinary share	12	65.8p	58.0p		60.4p

The financial statements on pages 25-38 of the 2021 Interim Report and Condensed Consolidated Financial Statements were approved at a meeting of the Board of Directors held on 22 November 2021 and signed on its behalf by:

Lorraine Baldry

Chairman

The accompanying notes 1 to 16 form an integral part of the condensed interim financial statements.

Condensed Consolidated Statement of Changes in Equity

For the period from 1 April 2020 to 30 September 2020 (unaudited)

	Notes		Share premium		Treasury share reserve		Revenue reserve	Total
			£000		£000		£000	£000
Balance as at 31 March 2020			219,090		(26,452)		117,168	309,806
Loss for the period			-		-		(8,776)	(8,776)
Share buyback			-		(2,256)		-	(2,256)
Dividend paid	5		-		-		(2,000)	(2,000)
Balance as at 30 September 2020			219,090		(28,708)		106,392	296,774
For the year ended 31 March 2021 (audited) and for the period from 1 April 2021 to 30 September 2021 (unaudited)
		Notes		Share premium		Treasury share reserve	Revenue reserve	Total
				£000		£000	£000	£000
Balance as at 31 March 2020				219,090		(26,452)	117,168	309,806
Profit for the year				-		-	4,542	4,542
Dividends paid		5		-		-	(7,989)	(7,989)
Share buyback				-		(9,515)	-	(9,515)
Balance as at 31 March 2021				219,090		(35,967)	113,721	296,844
Share buyback		12		-		(136)	-	(136)
Profit for the period				-		-	33,197	33,197
Dividends paid		5		-		-	(6,536)	(6,536)
Balance as at 30 September 2021				219,090		(36,103)	140,382	323,369

The accompanying notes 1 to 16 form an integral part of the condensed interim financial statements.

Condensed Consolidated Statement of Cash Flows

	Six months to	Six months to	Year to
	30/09/2021	30/09/2020	31/03/2021
	£000	£000	£000
	(unaudited)	(unaudited)	(audited)
Operating activities
Profit/(Loss) for the period/year	33,197	(8,776)	4,542
Adjustments for:
Profit on disposal of investment property	-	-	(121)
Net valuation (gain)/loss on investment property	(24,689)	13,500	8,286
Share of profit of joint ventures	(1,807)	(882)	(3,587)
Net finance cost	2,041	2,268	4,202
Operating cash generated before changes in working capital	8,742	6,110	13,322
Operating cash generated before changes in working capital

(Increase)/decrease in trade and other receivables	(2,072)	(3,421)	(1,923)
Increase/(decrease) in trade and other payables	244	702	1,254
Cash generated from operations	6,914	3,391	12,653

Finance costs paid	(1,918)	(2,034)	(3,990)
Interest received	-	74	-
Net cash from operating activities	4,996	1,431	8,663

Investing activities
Proceeds from the sale of investment property	-	-	6,409
Additions to investment property	(836)	(5,205)	(8,896)
Acquisition of investment property	-	-	(36,500)
Investment in joint ventures	(620)	-	-
Net income distributed from joint ventures	1,583	1,154	2,452
Net cash (used in)/from investing activities	127	(4,051)	(36,535)

Financing activities
Share buyback	(136)	(2,256)	(9,515)
Additions to external debt	-	-	24,500
Drawdown of external debt	-	52,500	-
Dividends paid	(6,536)	(2,000)	(7,989)
Net cash from/(used in) financing activities	(6,672)	48,244	6,996
Net (decrease)/increase in cash and cash equivalents for the period/year	(1,549)	45,624	(20,876)
Opening cash and cash equivalents	12,175	33,051	33,051
Closing cash and cash equivalents	10,626	78,675	12,175

The accompanying notes 1 to 16 form an integral part of the condensed interim financial statements.

Notes to the Interim Report

1. Significant accounting policies

Schroder Real Estate Investment Trust Limited ("the Company") is a closed-ended investment company incorporated in Guernsey. The condensed interim financial statements of the Company for the period ended 30 September 2021 comprise the Company, its subsidiaries and its interests in joint ventures (together referred to as the "Group").

Statement of compliance

The condensed interim financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom Financial Conduct Authority and IAS 34 Interim Financial Reporting. They do not include all the information required for the full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2021. The condensed interim financial statements have been prepared on the basis of the accounting policies set out in the Group's annual financial statements for the year ended 31 March 2021. The financial statements for the year ended 31 March 2021 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. The Group's annual financial statements refer to new Standards and Interpretations.

Going concern

The Directors have examined significant areas of possible financial risk, including the non-collection of rent and service charges as a result of the Covid-19 pandemic and the potential impact on property valuations; have reviewed cash flow forecasts; and have analysed forward-looking compliance with third party debt covenants, in particular the Loan to Value covenant and interest cover ratios.

Overall, after utilising available cash, excluding the cash undrawn against the RBS facility, and uncharged properties and units in Joint Ventures, and based on the reporting period to 30 September 2021, property valuations would have to fall by 45% before the relevant Canada Life Loan to Value covenants were breached, and actual net rental income would need to fall by 76% before the interest cover covenants were breached.

Furthermore, the properties charged to RBSI could fall in value by 72% prior to the 65% LTV covenant being reached and, based on actual net rents for the quarter to September 2021, a 78% fall in net income could be sustained prior to the RBSI loan covenant of 250% being breached.

The Board and Investment Manager continue to closely monitor the potential impact that the Covid-19 pandemic may have on the Company's rental collection and the requirement to distribute dividends in accordance with the REIT regulations. All future dividends will be kept under constant review to ensure the Company's liquid resources will be sufficient to cover any working capital requirements.

The Directors have not identified any matters which would cast significant doubt on the Group's ability to continue as a going concern for the period to 22 November 2022. In addition to the matters described above, in arriving at their conclusion the Directors have also considered:

· The current cash balance at 22 November 2021 of £12.98 million;

· The nature and timing of the Company's income and expenses; and

· That the Investment Manager and Administrator have successfully invoked their business continuity plans to help ensure the safety and well-being of their staff thereby retaining the ability to maintain the Company's business operations.

The Directors have satisfied themselves that the Group has adequate resources to continue in operational existence for at least the next twelve months from the date of approval of the financial statements. After due consideration, the Board believes it is appropriate to adopt the going concern basis in preparing the condensed interim financial statements.

Use of estimates and judgments

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. There have been no changes in the judgements and estimates used by management as disclosed in the last annual report and financial statements for the year ended 31 March 2021.

Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment, and in one geographical area, the United Kingdom. There is no one tenant that represents more than 10% of the Group's revenue. The chief operating decision-maker is considered to be the Board of Directors who are provided with consolidated IFRS information on a quarterly basis.

2. Material agreements

Schroder Real Estate Investment Management Limited is the Investment Manager to the Company.

Between the period of 1 April 2021 to 30 June 2021 the Investment Manager was entitled to a fee of 1.1% payable monthly and calculated with regard to the NAV of the Group.

With effect from 1 July 2021 a new fee agreement was agreed and implemented between the Board and the Investment Manager which includes a blended (not cliff edge), tiered fee structure as follows:

NAV	Management fee percentage per annum of NAV
<£500 million	0.9%
£500 million - £1 billion	0.8%
£1 billion+	0.7%

The fee covers all of the appointed services of the Investment Manager and there are standard provisions for the reimbursement of expenses. Additional fees can be agreed for out of scope services on an ad hoc basis.

The total charge to profit during the period was £1,397,000 (year to 31 March 2021: £2,906,000; six months to 30 September 2020: £1,449,000). At the period end no amount was outstanding (31 March 2021: £20,000; 30 September 2020: £646,000).

Northern Trust International Fund Administration Services (Guernsey) Limited was the Administrator to the Company during the period. The Administrator was entitled to an annual fee equal to £120,000 of which no sum (31 March 2021: £30,000; 30 September 2020: £30,000) was outstanding at the period end.

With effect from 1 October 2021, Langham Hall (Guernsey) Limited and Langham Hall UK Depositary LLP replaced Northern Trust and will provide Administration, Designated Manager and Depositary services to the Group respectively going forward.

3. Basic and Diluted Earnings per share

The basic and diluted earnings per share for the Group is based on the profit for the period of £33,197,000 (31 March 2021: profit of £4,542,000; 30 September 2020: loss of £8,776,000) and the weighted average number of ordinary shares in issue during the period of 491,086,039 (31 March 2021: 508,699,880 and 30 September 2020: 518,056,505).

4. Taxation

	01/04/2021 to 30/09/2021	01/04/2020 to 30/09/2020	01/04/2020 to 31/03/2021
	£000	£000	£000
Tax expense in the period/year	-	-	-

Reconciliation:
Profit/(loss) before tax	33,197	(8,776)	4,542
Effect of:
Tax using the UK corporation tax rate of 19%	6,307	(1,667)	863
Revaluation (profit)/loss not taxable	(4,691)	2,565	1,574
Share of revaluation (profit)/loss of joint ventures not taxable	(43)	75	(216)
(Profit)/loss on disposal of investment property not taxable	-	-	(23)
UK REIT exemption on non-capital income	(1,573)	(973)	(2,198)
Current tax expense in the year	-	-	-

SREIT has elected to be treated as a UK real estate investment trust ("REIT"). The UK REIT rules exempt the profits of SREIT and its subsidiaries' (the "Group") UK property rental business from corporation tax. Gains on UK properties are also exempt from tax, provided they are not held for trading or sold in the three years after completion of development. The Group is otherwise subject to corporation tax.

As a REIT, SREIT is required to pay Property Income Distributions equal to at least 90% of the Group's exempted net income. To retain UK REIT status there are a number of conditions to be met in respect of the principal company of the Group, the Group's qualifying activity and its balance of business. The Group continues to meet these conditions.

5. Dividends paid

	Number of		01/04/2021 to
In respect of	ordinary	Rate	30/09/2021
	shares	(pence)	£000
Q/e 31 March 2021 (dividend paid 25 June 2021)	491.08 million	0.656	3,221
Q/e 30 June 2021 (dividend paid 13 August 2021)	491.08 million	0.675	3,315
		1.331	6,536

	Number of		01/04/2020 to
In respect of	ordinary	Rate	30/09/2020
	shares	(pence)	£000
Q/e 30 June 2020 (dividend paid 18 August 2020)	518.51 million	0.39	2,000

	Number of		01/04/2020 to
In respect of	ordinary	Rate	31/03/2021
	shares	(pence)	£000
Q/e 30 June 2020 (dividend paid 18 August 2020)	518.51 million	0.386	2,000
Q/e 30 Sept 2020 (dividend paid 11 December 2020)	503.30 million	0.575	2,895
Q/e 31 December 2020 (dividend paid 12 March 2021)	495.00 million	0.625	3,094
		1.5858	7,989

A dividend for the quarter ended 30 September 2021 of 0.726 pence per share (totalling £3.56 million) was approved on 22 November 2021 and will be paid on 17 December 2021.

6. Investment property

For the period 1 April 2020 to 30 September 2020 (unaudited)

	Leasehold	Freehold	Total
	£000	£000	£000
Fair value as at 1 April 2020	36,818	284,564	321,382
Additions	5	5,200	5,205
Fair value leasehold adjustment	(4)	-	(4)
Net valuation gain on investment property	(3,210)	(10,290)	(13,500)
Fair value as at 30 September 2020	33,609	279,474	313,083

6. Investment property (continued)

For the year 1 April 2020 to 31 March 2021 (audited)

	Leasehold	Freehold	Total
	£000	£000	£000
Fair value as at 1 April 2020	36,818	284,564	321,382
Additions	8,856	40	8,896
Acquisitions	-	36,500	36,500
Gross proceeds on disposals	(4,116)	(2,293)	(6,409)
Realised gain on disposals	65	56	121
Fair value leasehold adjustment	(428)	-	(428)
Net valuation loss on investment property	(4,819)	(3,467)	(8,286)
Fair value as at 31 March 2021	36,376	315,400	351,776

For the period 1 April 2021 to 30 September 2021 (unaudited)

	Leasehold	Freehold	Total
	£000	£000	£000
Fair value as at 1 April 2021	36,376	315,400	351,776
Additions	-	836	836
Fair value leasehold adjustment	-	-	-
Net valuation gain on investment property	1,082	23,607	24,689
Fair value as at 30 September 2021	37,458	339,873	377,301

The fair value of investment property, as determined by the valuer, totals £384,375,000 (31 March 2021: £359,300,000; 30 September 2020: £320,050,000). None of this sum was in relation to an unconditional exchange of contracts (March 2021: £nil; September 2020: £nil).

As at 30 September 2021, £9,062,304 (31 March 2021: £9,512,762; 30 September 2020: £9,739,000) in connection with lease incentives is included within trade and other receivables. Furthermore, included in non-current liabilities is a sum of £1,987,395 (31 March 2021: £1,988,000; September 2020: £2,412,000) relating to the fair value of the leasehold element of The Galaxy, Luton.

The fair value of investment property has been determined by Knight Frank LLP, a firm of independent chartered surveyors, who are registered independent appraisers. The valuation has been undertaken in accordance with the current editions of RICS Valuation - Global Standards, which incorporate the International Valuation Standards, and the RICS UK National Supplement issued by the Royal Institution of Chartered Surveyors (the "Red Book").

The properties have been valued on the basis of "Fair Value" in accordance with the RICS Valuation - Professional Standards VPS4(7.1) Fair Value and VPGA1 Valuations for Inclusion in Financial Statements which adopt the definition of Fair Value used by the International Accounting Standards Board.

The valuation has been undertaken using appropriate valuation methodology and the Valuer's professional judgement. The Valuer's opinion of Fair Value was primarily derived using recent comparable market transactions on arm's length terms, where available, and appropriate valuation techniques (The Investment Method).

The properties have been valued individually and not as part of a portfolio.

6. Investment property (continued)

All investment properties are categorised as Level 3 fair values as they use significant unobservable inputs. There have not been any transfers between Levels during the year. Investment properties have been classed according to their real estate sector. Information on these significant unobservable inputs per class of investment property is disclosed below:

Quantitative information about fair value measurement using unobservable inputs (Level 3) as at 30 September 2021 (unaudited)

		Industrial	Retail (incl retail warehouse)	Office	Other	Total
Fair value (£'000)		192,400	90,450	84,075	17,450	384,375
Area ('000 sq ft)		1,963	506	414	177	3,060
Net passing rent psf per annum	Range Weighted average	£0 - £13.23 £5.03	£0 - £32.85 £12.26	£0 - £29.10 £15.92	£0 -£13.00 £7.39	£0 - £32.85 £7.84
Gross ERV psf per annum	Range Weighted average	£3.00 - £14.00 £4.81	£7.40 - £32.85 £13.35	£10.00-£24.00 £17.66	£2.10 -£13.00 £7.98	£2.10 - £32.85 £8.87
Net initial yield (1)	Range Weighted average	3.94% - 7.19% 4.81%	2.27% -8.24% 6.42%	3.63%-11.19% 7.34%	4.76%-10.23% 7.04%	2.27% - 11.19% 5.84%
Equivalent yield	Range Weighted average	4.84% - 7.21% 5.72%	5.71%-10.08% 7.07%	5.79%-9.47% 7.79%	4.76% -9.27% 7.31%	4.76%-10.08% 6.37%

Notes: ⁽¹⁾ Yields based on rents receivable after deduction of head rents, but gross of non-recoverables.

Quantitative information about fair value measurement using unobservable inputs (Level 3) as at 31 March 2021 (audited)

		Industrial	Retail (incl retail warehouse)	Office	Other	Total
Fair value (£000)		170,400	87,050	85,350	16,500	359,300
Area ('000 sq. ft)		1,963	506	414	177	3,060
Net passing rent per sq. ft per annum	Range Weighted average	£4.20 - £8.36 £5.16	£0 - £32.85 £11.46	£0 - £29.10 £16.46	£0 -£13.00 £6.95	£0 - £32.85 £7.55
Gross ERV per sq. ft per annum	Range Weighted average	£3.50 - £13.00 £5.70	£7.40 - £32.85 £13.40	£12.00-£24.00 £17.59	£2.10 -£13.00 £7.98	£3.50 - £32.85 £8.40
Net initial yield ⁽¹⁾	Range Weighted average	4.40% - 7.02% 5.57%	2.72% -9.45% 6.24%	5.77%-11.00% 7.47%	4.75%-9.27% 7.00%	2.72% - 11.00% 6.25%
Equivalent yield	Range Weighted average	5.10% - 7.41% 6.16%	5.80%-10.04% 7.38%	5.72%-9.25% 7.74%	4.75% -8.96% 7.25%	4.75%-10.04% 6.65%

Notes: ⁽¹⁾ Yields based on rents receivable after deduction of head rents, but gross of non-recoverables.

6. Investment property (continued)

Sensitivity of measurement to variations in the significant unobservable inputs

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the Group's property portfolio, together with the impact of significant movements in these inputs on the fair value measurement, are shown below:

Unobservable input	Impact on fair value measurement of significant increase in input	Impact on fair value measurement of significant decrease in input
Passing rent	Increase	Decrease
Gross ERV	Increase	Decrease
Net initial yield	Decrease	Increase
Equivalent yield	Decrease	Increase

There are interrelationships between the yields and rental values as they are partially determined by market rate conditions. The sensitivity of the valuation to changes in the most significant inputs per class of investment property are shown below:

Estimated movement in fair value of investment properties at 30 September 2021 (unaudited)	Industrial £'000	Retail £'000	Office £'000	Other £'000	Total £'000
Increase in ERV by 5%	9,209	2,611	3,878	738	16,436
Decrease in ERV by 5%	(9,055)	(3,420)	(3,788)	(455)	(16,718)
Increase in net initial yield by 0.25%	(9,507)	(3,390)	(2,771)	(598)	(15,773)
Decrease in net initial yield by 0.25%	10,549	3,664	2,967	643	17,183

Estimated movement in fair value of investment properties at 31 March 2021 (audited)	Industrial £'000	Retail £'000	Office £'000	Other £'000	Total £'000
Increase in ERV by 5%	8,119	2,536	3,822	706	15,183
Decrease in ERV by 5%	(7,955)	(3,497)	(3,809)	(501)	(15,762)
Increase in net initial yield by 0.25%	(7,320)	(3,355)	(2,763)	(569)	(13,821)
Decrease in net initial yield by 0.25%	8,008	3,635	2,954	611	14,973

7. Investment in joint ventures

For the period 1 April 2020 to 30 September 2020 (unaudited)

		£000
Opening balance as at 1 April 2020		77,985
Share of net rental income		1,276
Distributions received/receivable		(1,276)
Share of valuation loss		(394)
Amounts recognised as joint ventures at 30 September 2020		77,591

For the year 1 April 2020 to 31 March 2021 (audited)

	£000
Opening balance as at 1 April 2020	77,985
Share of valuation gain	1,135
Amounts recognised as joint ventures at 31 March 2021	79,120

For the period 1 April 2021 to 30 September 2021 (unaudited)

		£000
Opening balance as at 1 April 2021		79,120
Share of net rental income		1,583
Distributions received/receivable		(1,583)
Purchase of units in City Tower Unit Trust to fund capital expenditure		620
Share of valuation profit		224
Amounts recognised as joint ventures at 30 September 2021		79,964

8. Trade and other receivables

	Six months to 30/09/2021	Six months to 30/09/2020	Year to 31/03/2021
	£000	£000	£000
Rent receivable	4,072	4,343	4,094
Sundry debtors and prepayments	5,982	4,823	3,422
Lease Incentives	9,063	9,369	9,512
	19,117	18,535	17,028

£5.03 million (gross) was owed by tenants as at period end and a net bad debt provision of £0.8m was made with regard to expected credit losses (31 March 2021 £1.1m; 30 September 2020: £1.04m) .

When determining an appropriate bad debt provision the following key factors were considered: the tenants' rent deposits held; the tenants' covenants; financial strength and rent and service charge-paying histories; and the current trading situation of the tenants.

Sundry debtors and prepayments includes £9,063,000 (31 March 2021: £9,512,000; 30 September 2020: £9,369,000) in respect of lease incentives, which are spread over the term of the lease.

9.Cash and cash equivalents

As at 30 September 2021 the group had £10.6 million in cash (31 March 2021: £12.2 million; 30 September 2020: £78.7 million) and none of this sum was held with Canada Life (31 March 2021: Nil; 30 September 2020: £18.3 million).

10. Interest-bearing loans and borrowings

The Group has in place a £129.6 million loan facility with Canada Life and the loan is split in to two equal tranches of £64.8m as follows:

- Facility A matures in October 2032 and attracts an interest rate of 2.36%; and

- Facility B matures in October 2039 and attracts an interest rate of 2.62%.

The Canada Life facility has a first charge security over all the property assets in the ring-fenced Security Pool which at 30 September 2021 contained properties valued at £290.8 million. Various restraints apply during the term of the loan although the facility has been designed to provide significant operational flexibility.

The Company also has in place a revolving credit facility ('RCF') with Royal Bank of Scotland International, which expires in July 2023, and the current RCF limit stands at £52.5 million. As at 30 September 2021, there was a balance of £24.5m drawn (March 2021: £24.5m; September 2020: £52.5m).

The RBS facility has a first charge security over all the assets held in SREIT No.2 Limited which at 30 September 2021 contained properties valued at £133.8 million.

The interest rate as at the period end was based on the Loan to Value ratio as set out below:

- LIBOR + 1.60% if the Loan to Value is less than or equal to 60%--; and

- LIBOR + 1.85% if the Loan to Value is greater than 60%.

During both the current and prior periods, the Loan to Value has remained at less than 60%. Since this loan has variable interest, an interest rate cap for £32.5m of the loan was entered into and this comes in to effect if GBP 3 month LIBOR reaches 1.5%. As at the reporting date, GBP 3 month LIBOR has not reached 1.5%.

Post the period end the RBS facility has transitioned from LIBOR to SONIA for interest payments due post October 2021.

As at 30 September 2021, the Group has total loan balances drawn of £154.09 million and £0.6 million of unamortised arrangement fees (31 March 2021: £154.99 million and £0.7 million of unamortised arrangement fees; September 2020: £182.09 million and £0.7 of unamortised arrangement fees).

The fair value of the fixed-interest Canada Life debt is based on the present value of future cash flows discounted at a market rate of interest. As at 30 September 2021, the fair value of the Group's £129.59 million loan with Canada Life was £129.4 million (31 March 2021: £131.1 million, 30 September 2020: £150.6 million).

11. Trade and other payables

	Six months to 30/09/2021	Six months to 30/09/2020	Year to 31/03/2021
	£000	£000	£000
Deferred income	3,812	3,351	3,701
Rental deposits	1,480	1,245	1,448
Interest payable	807	915	780
Other payables and accruals	2,043	1,836	1,968
	8,142	7,347	7,897

12. NAV per ordinary share and share buyback

Between the 1 April 2021 to 12 April 2021 the Company purchased a further sum of 338,340 shares for a sum of £0.14m at an average price of 40 pence per share.

As a consequence of the buyback, the number of ordinary shares in issue fell from 491,418,641 to 491,080,301 during the reporting period.

The NAV per ordinary share is based on the net assets of £323,368,806 (31 March 2021: £296,844,000; 30 September 2020: £296,774,000) and 491,080,301 ordinary shares in issue at the Statement of Financial Position reporting date (31 March 2021: 491,418,641 and 30 September 2020: 511,364,955).

13. Financial risk factors

The Directors are of the opinion that there have been no significant changes to the financial risk profile of the Group since the end of the last annual financial reporting period ended 31 March 2021. The main risks arising from the Group's financial instruments and properties are market price risk, credit risk, liquidity risk and interest rate risk. The Group is only directly exposed to sterling and hence is not exposed to currency risk. The Board regularly reviews and agrees policies for managing each of these risks.

14. Related party transactions

Material agreements are disclosed in note 2. The Directors' remuneration for the six month period for services to the Group was £75,000 (31 March 2021: £150,000, 30 September 2020: £75,000) of which £nil was outstanding at period end (31 March 2021: £nil; 30 September 2020: £nil). Transactions with joint ventures are disclosed in note 7.

15. Capital commitments

At 30 September 2021 the Group had capital commitments for capital expenditure of £4.1 million (31 March 2021: £3.2 million; 30 September 2020: £3.1 million).

16. Post balance sheet events

On 17 November 2021 the Group exchanged with regard to four industrial acquisitions in Haydock, Sandbach and Birkenhead.

The asset in Haydock completed on 19 November 2021 for a net purchase price of £4.86m.

Two assets in Sandbach also completed on 19 November 2021 for a net purchase price of £3.59m.

The asset in Birkenhead will complete in December 2021 for a net price of £11.40m.

On 18 November 2021 the Group drew down a further £9.0m on its RBS revolving credit facility which has since increased the total balance drawn from £24.5m to £33.5m as at the signing date. A further £12.2m is intended to be drawn down ahead of the Birkenhead completion.

EPRA Performance Measures (unaudited)

As recommended by the European Public Real Estate Association ('EPRA'), key performance measures are disclosed in the section below.

a. EPRA earnings and EPRA earnings per share

Represents total IFRS comprehensive income excluding realised and unrealised gains/losses on investment property and the share of net valuation profit/loss in joint ventures, divided by the weighted average number of shares.

	Six months to 30 September 2021 £000 (unaudited)	Six months to 30 September 2020 £000 (unaudited)	Year to 31 March 2021 £000 (audited)
Total IFRS comprehensive income	33,197	(8,776)	4,542
Adjustments to calculate EPRA earnings:
(Gain)/loss on the disposal of investment property	-	-	(121)
Net unrealised valuation (gain)/loss on investment property	(24,689)	13,500	8,286
Share of net valuation profit/(loss) in joint ventures	(224)	394	(1,135)
EPRA earnings	8,284	5,118	11,572
Weighted average number of ordinary shares	491,086,039	518,056,505	508,699,880
EPRA earnings per share (pence per share)	1.7	1.0	2.3

b. EPRA Net Reinstatement Value

	Six months to 30 September 2021 £000 (unaudited)
IFRS equity attributable to shareholders	323,369
Adjustment in respect of real estate transfer taxes and costs	31,137
EPRA Net Reinstatement Value	354,506
Shares in issue at the end of the period	491,080,301
EPRA NRV per share (pence per share)	72.2

c. EPRA Net Tangible Assets

	Six months to 30 September 2021 £000 (unaudited)
IFRS equity attributable to shareholders	323,369
EPRA Net Tangible Assets	323,369
Shares in issue at the end of the period	491,080,301
EPRA NRV per share (pence per share)	65.8

EPRA Performance Measures (unaudited)

d. EPRA Net Disposal Value

	Six months to 30 September 2021 £000 (unaudited)
IFRS equity attributable to shareholders	323,369
Adjustment for the fair value of fixed interest rate debt	223
EPRA Net Disposal Value	323,592
Shares in issue at the end of the period	491,080,301
EPRA NRV per share (pence per share)	65.9

Glossary

Alternative performance measure ("APM")	please see page 41 for full details of the key APMs used by the Company.
Annualised dividend yield	being the dividend paid during the period annualised and expressed as a percentage of the period end share price.
Articles	means the Company's articles of incorporation, as amended from time to time.
Companies Law	means the Companies (Guernsey) Law, 2008.
Company	is Schroder Real Estate Investment Trust Limited.
Directors	means the directors of the Company as at the date of this document.
Disclosure Guidance and Transparency Rules	means the disclosure guidance and transparency rules contained within the FCA's Handbook of Rules and Guidance.
Earnings per share ("EPS")	is the profit after taxation divided by the weighted average number of shares in issue during the period.
Estimated rental value ("ERV")	is the Group's external valuers' reasonable opinion as to the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review at a property.
EPRA	is the European Public Real Estate Association.
EPRA Earnings per share	is the EPRA earnings divided by the weighted average number of shares in issue during the period.
FCA	is the UK Financial Conduct Authority.
Gearing	is the Group's net debt as a percentage of adjusted net assets.
Group	is the Company and its subsidiaries.
Initial yield	is the annualised net rents generated by the portfolio expressed as a percentage of the portfolio valuation.
Interest cover	is the number of times Group net interest payable is covered by Group net rental income.
Listing Rules	means the listing rules made by the FCA under Part VII of the UK Financial Services and Markets Act 2000, as amended.
Market Abuse Regulation	means regulation (EU) No.596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse.
MSCI	(formerly Investment Property Databank or 'IPD') is a Company that produces an independent benchmark of property returns.
Net Asset Value ("NAV")	is shareholders' funds divided by the number of shares in issue at the period end.
NAV total return	is calculated taking into account both capital returns and income returns in the form of dividends paid to shareholders.
Net rental income	is the rental income receivable in the period after payment of ground rents and net property outgoings.
REIT	is a Real Estate Investment Trust.
Reversionary yield	is the anticipated yield which the initial yield will rise to once the rent reaches the estimated rental value.

Alternative Performance Measures (unaudited)

The Company uses the following Alternative Performance Measures ("APMs") in its Interim Report and Consolidated Financial Statements. The Board believes that each of the APMs provides additional useful information to the shareholders in order to assess the Company's performance.

Dividend Cover - the ratio of EPRA Earnings (note 3) to dividends paid (note 5) in the period. Earnings excludes capital items such as revaluation movements on investments and gains or losses on the disposal of investment properties.

Dividend Yield - the dividends paid, expressed as a percentage, relative to the share price. To note that for six monthly interim periods this is annualised.

EPRA Earnings - earnings excluding all capital components not relevant to the underlying net income performance of the Company, such as the unrealised fair value gains or losses on investment properties and any gains or losses from the sales of properties. See note 3 for a reconciliation of this figure.

EPRA Net Tangible Assets - the IFRS equity attributable to shareholders adjusted to reflect a Company's tangible assets and assumes that no selling of assets takes place.

EPRA Net Disposal Value - the IFRS equity attributable to shareholders adjusted to reflect the NAV under an orderly sale of business, where any deferred tax, financial instruments and certain other adjustments are calculated to the full extent of their liability.

EPRA Net Reinstatement Value - IFRS equity attributable to shareholders adjusted to represent the value required to rebuild the entity and assumes that no selling of assets takes place.

Gross LTV - the value of the external loans unadjusted for unamortised arrangement costs (note 10) expressed as a percentage of the market value of property investments as at the Balance Sheet date. The market value of property investments includes joint venture investments and are as per external valuations and have not been adjusted for IFRS lease incentive balances or the fair value of the head lease at Luton.

LTV Net of Cash - the value of the external loans unadjusted for unamortised arrangement costs (note 10) less cash held (note 9) expressed as a percentage of the market value of the property investments as at the Balance Sheet date. The market value of property investments includes joint venture investments and are as per external valuations and have not been adjusted for IFRS lease incentive balances or the fair value of the head lease at Luton.

Ongoing Charges (including fund only expenses) - all fund costs expected to be regularly incurred and that are payable by the Company expressed as a percentage of the average quarterly NAVs of the Company for the financial period. Any capital costs, including capital expenditure or acquisition/disposal fees, are excluded.

Ongoing Charges (including fund and property expenses) - all operating costs expected to be regularly incurred and that are payable by the Company expressed as a percentage of the average quarterly NAVs of the Company for the financial period. Any capital costs, including capital expenditure and acquisition/disposal fees, are excluded.

Share Discount/Premium - the share price of the Company is derived from buyers and sellers trading their shares on the stock market. This price is not identical to the NAV per share of the underlying assets less liabilities of the Company. If the share price is lower than the NAV per share, the shares are trading at a discount. Shares trading above the NAV per share are said to be at a premium. The discount/premium is calculated as the variance between the share price as at the Balance Sheet date and the NAV per share (page 25 of the 2021 Interim Report and Condensed Consolidated Financial Statements ) expressed as a percentage.

NAV total return - the return to shareholders calculated on a per share basis by adding dividends paid (note 5) in the period on a time-weighted basis to the increase or decrease in the NAV per share (page 25 of the 2021 Interim Report and Condensed Consolidated Financial Statements).

Corporate information

Registered Address

North Suite 2

Town Mills

Rue Du Pre

St. Peter Port

Guernsey GY1 1LT

Directors (All Non-Executive)

Lorraine Baldry (Chairman)

Graham Basham

Stephen Bligh

Alastair Hughes

Investment Manager and Accounting Agent

Schroder Real Estate Investment Management Limited

1 London Wall Place

London

EC2Y 5AU

Administrator

Langham Hall (Guernsey) Limited

North Suite 2

Town Mills

Rue Du Pre

St. Peter Port

Guernsey GY1 1LT

Company Secretary

Schroder Investment Management Limited

1 London Wall Place

London

EC2Y 5AU

Independent Auditor

Ernst & Young LLP

Royal Chambers

St. Julian's Avenue

St. Peter Port

Guernsey GY1 4AF

Property Valuers

Knight Frank LLP

55 Baker Street

London

W1U 8AN

Sponsor and Broker

J.P. Morgan Cazenove

25 Bank Street

Canary Wharf

London E14 5JP

Tax Advisor

Deloitte LLP

2 New Street Square

London

EC4A 3BZ

Receiving Agent and UK

Transfer/Paying Agent

Computershare Investor Services

(Guernsey) Limited

1st Floor

Tudor House

Le Bordage

St. Peter Port

Guernsey GY1 1DB

Solicitors to the Company

as to English Law:

Stephenson Harwood LLP

1 Finsbury Circus

London

EC2M 7SH

as to Guernsey Law:

Mourant

Royal Chambers

St. Julian's Avenue

St. Peter Port

Guernsey GY1 4HP

Depositary

Langham Hall UK Depositary LLP

8th Floor

1 Fleet Place

London

EC4M 7RA

ISA

The Company's shares are eligible for Individual Savings Accounts ('ISAs').

FATCA GIIN

5BM7YG.99999.SL.831

Endnotes:

^{^[i]}Winning Cities defined as higher growth locations - Source: Oxford Economics/Schroders.

^{^[ii]}This is an APM, please see page 42 for details.

[iii] This is an Alternative Performance Measure ("APM"). Details of the calculation are included in the APM section on page 42 of the 2021 Interim Report and Condensed Consolidated Financial Statements.

[iv] This is an APM. EPRA calculations are included in the EPRA Performance measures section on page 39 of the 2021 Interim Report and Condensed Consolidated Financial Statements .

[v] On-balance sheet borrowings reflect the loan facilities with Canada Life and RBS without the deduction of unamortised finance costs of £0.6m.

[vi] This is an APM. Details of the calculation are included on page 42 of the 2021 Interim Report and Condensed Consolidated Financial Statements.

[vii] Cash held at balance sheet date including £800,000 of cash held within the joint ventures.

[viii] Note Central London is defined by MSCI as City, Mid-Town, West End and Inner London.

[ix] The Company listed in July 2004.

[x] Cash held at balance sheet date including £0.8m of cash held within the joint ventures

[xi] Loan balance divided by property value as at 30 September 2021.

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

[xiii] The projected ICR covenant for the contracted four quarters following the IPD deducting assumed non-recoverable costs (void rates, void service charge and void insurance)/interest paid) based on the average of the past four quarters.

[xiv] Fixed total interest rate for the loan term.

[xv] Loan balance divided by property value as at 30 September 2021.

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

[xvii] The projected ICR covenant of the contracted four quarters following the IPD deducting assumed non-recoverable costs (void rates, void service charge and void insurance)/interest paid) based on the average of the past four quarters.

[xviii] Facility drawn at 30 September 2021 from a total available facility of £52.5 million.

[xix] Total interest rate as at 30 September 2021 comprising 3 months LIBOR of 0.082% and the margin of 1.6% at an LTV below 60% and a margin of 1.90% above 60% LTV.

[xx] This covenant drops to 60% after year three of the five-year term.

[xxi] Loan balance divided by property value as at 30 September 2021.

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

[xxiii] The projected ICR covenant of the contracted four quarters following the IPD deducting assumed non-recoverable costs (void rates, void service charge and void insurance)/interest paid) based on the average of the past four quarters.

[xxiv] Facility drawn at 30 September 2021 from a total available facility of £52.5 million.

[xxv] Total interest rate as at 30 September 2021 comprising 3 months LIBOR of 0.082% and the margin of 1.6% at an LTV below 60% and a margin of 1.90% above 60% LTV.

[xxvi] This covenant drops to 60% after year three of the five-year term.

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