Picture: 123RF/NDUL
Picture: 123RF/NDUL

A JSE-listed property arm of British multinational asset management company Schroders, which focuses on West European capital cities​, will no longer invest in shopping centres over the next five years amid concerns that the retail asset class will struggle.

Schroder European Real Estate Investment Trust (Sereit), which acts as a currency hedge for South Africans as it pays its dividends in euro, will focus its capital on assets which promise better growth such as industrial warehouses and offices in cities popular among young professionals such as Berlin and Paris, fund manager Jeff O’Dwyer said, commenting on financial results for the year to September.

He expected prime shopping centre rents to fall over the next three years. Sereit owns only one large retail centre, in Seville, Spain.

General shopping centres in Europe have been most affected, as retailers adapt to growing online competition and fewer shoppers, he said.

“Several retailers failed during the period, and even successful ones closed more stores than they opened. We just feel there are better growth opportunities in other property sectors. Some retail is doing well such as our Spanish asset but overall we aren’t attracted to shopping malls going forward for the next five years,” he said.

The group would adopt a defensive stance in “the wake of these conditions, saying it will target high-growth sectors”.

The company’s portfolio value rose 9.3% to €242.7m (about R3.9bn) in its year to end-September, with acquisitions in the period including a 20% stake in a French logistics asset for €18.2bn.

The company declared a total dividend of 7.4c per share, in line with its target of 5.5% growth.

The year has been important for positioning the group’s long-term income and capital growth, said board chair Julian Berney, adding the company’s portfolio was becoming more diversified.

O’Dwyer said it was key that Sereit had restructured itself and was still offering an attractive dividend yield.

“While there are pockets of weakness, such as in the retail shopping centre sector, our limited exposure to underperforming parts of the market and balanced portfolio helps mitigate us against these,” said O’Dwyer.

About 10% of Sereit is owned by South Africans.

O’Dwyer said some South Africans had put their investments into eastern European funds. He said Sereit still offered some of the most attractive returns for South Africans from European assets. The company was considering investing in Nordic countries when it raises capital in the future.



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