SEREIT Reports 2.0% NAV Return Amid French Tax Dispute and KPN Departure Risks

SEREIT FY2025: positive NAV return, income steady and risks clearly flagged

Schroder European Real Estate Investment Trust (SEREIT) has posted full-year results to 30 September 2025 showing a +2.0% NAV total return, underpinned by resilient earnings and a cautious but improving market backdrop across continental Europe. The dividend was held flat and the balance sheet remains conservative. Management is frank about two big swing factors ahead: a French tax dispute and the potential departure of its largest tenant, KPN, in December 2026.

Key numbers investors need to see

Net Asset Value	€156.7 million
NAV per share	119.2 cps
NAV total return	+2.0%
IFRS profit	€2.2 million
EPRA earnings (underlying)	€7.3 million before exceptional items; €6.7 million after
Dividend	5.92 euro cps (unchanged), 94% covered by EPRA earnings (pre-exceptional)
Implied dividend yield	c.8.2% (at 63.2 pence, 1 December 2025)
Loan-to-value (LTV)	29% gross of cash; 25% net of cash
Available cash	c.€8.3 million (plus €14.2 million ring-fenced for French tax matter)
Direct portfolio value	€194.0 million, down 1.4% net of capex
Occupancy	97% post period-end (94% at 30 Sept 2025)
Blended cost of debt	3.8%; average term 2.3 years

Quick refresher on jargon: EPRA earnings are a property industry measure of recurring profits, and LTV is debt as a percentage of property value.

Dividend held, income resilient – but KPN looms large

The quarterly payout stays at 1.48 euro cents per share, or 5.92 cps for the year, with 94% coverage on an underlying basis. That’s attractive at c.8.2% yield, and cash collection remains strong.

The obvious caveat is KPN. The Dutch telecoms group is SEREIT’s largest tenant at 19% of contracted rent, occupying the mixed-use data centre and office in Apeldoorn. KPN has verbally indicated it will vacate at lease expiry in December 2026. Management is working on re-letting, alternative uses and a potential sale. The RNS is clear: if the Apeldoorn income is not fully replaced, “the level of future dividends or earnings cover will likely be impacted”.

Balance sheet strength buys time and options

Net LTV is a modest 25% and gross 29%, helped by disposal proceeds from Frankfurt and reduced borrowings to €64.3 million. Debt is diversified across five facilities, with the next maturity in June 2026 against the Berlin DIY asset – a property that has just secured a long lease extension, which should aid refinancing.

• Blended all-in interest cost: 3.8%.
• Average loan term: 2.3 years; no expiries until June 2026, then none until December 2027.
• Share buybacks: 2,326,700 shares for £1.5 million (€1.8 million) during the year, accretive to NAV per share.

In short, gearing is sensible, covenants are compliant, and cash cushions are in place. That matters if leasing markets slow or the tax issue takes longer to resolve.

Portfolio: industrial strength offsets office softness; Berlin and Paris wins

Like-for-like, the portfolio slipped 1.4% to €194.0 million, but the mix tells the story. Industrial assets rose c.5% on improved sentiment, while offices fell c.5% and Berlin DIY edged down 2%. Apeldoorn’s value was marked 13% lower due to the shortening lease term.

• Income actions: ten new leases/re-gears adding €2.1 million per annum at a weighted term of 11 years.
• Berlin DIY: a 12-year, triple-net re-gear with Hornbach (10% of rent) to December 2037.
• Paris office: two lettings on c.900 sqm after year-end lifted occupancy to 97%.
• Total property return: +5.6% driven by income return of +7.1% offsetting -1.5% capital return.

Sector split by value: industrial 37%, offices 36%, retail (DIY) 14%, alternatives 9%, and cash 4%. The portfolio’s breadth and a tenant roster where the top ten represent 73% of rent provide diversification, though KPN concentration remains the swing factor.

French tax dispute: guaranteed, appealed, and ring-fenced

The Group has received a notice of adjustment from the French Tax Authority of c.€14.2 million including interest and penalties. SEREIT strongly contests this and has formally appealed. Post year-end, a bank guarantee of approximately €12.2 million (principal only) was arranged, and €14.2 million has been ring-fenced from cash reserves in prudence.

Based on professional advice, the Board has not booked a provision as an outflow is not considered probable. The authority is expected to review the appeal within six months; if dismissed, a court process could run up to two years. In the meantime, liquidity remains adequate and all loans are in covenant compliance.

Sustainability and asset quality: progress that should support liquidity

SEREIT integrated findings from third-party sustainability and Net Zero Carbon audits across 11 assets into 2025 business plans. The GRESB score rose by four points to 86, retaining four-star status. Practical touches – like improved BREEAM In-Use at Berlin and planned upgrades at Rumilly – help keep space relevant, which ultimately shows up in leasing and liquidity.

My read on the positives and the pinch points

• Positives: sensible gearing, diversified debt with near-term refinancing anchored by a long lease, strong cash collection, high occupancy (97%), and demonstrable asset management momentum. The dividend yield is eye-catching and currently well covered on underlying earnings.
• Pinch points: the KPN expiry in December 2026 is a real binary risk given it is 19% of rent and 6% of portfolio value. The French tax issue adds uncertainty and ties up cash, even if management believes the liability is not payable. Offices remain soft, and valuation headwinds could persist if yields move out again.

Why it matters for the discount and future returns

The shares continue to trade at a discount to NAV, reflecting small-cap liquidity, sector caution, and the two disclosed overhangs. A clean resolution on the French tax matter and a credible plan for Apeldoorn – re-let, repurpose or recycle – would be powerful catalysts for narrowing that discount. Meanwhile, the industrial tilt and inflation-linked leases support income in the current rate environment.

What I’m watching next

• Apeldoorn strategy: evidence of re-letting progress, planning progress for alternative uses, or a disposal at a sensible price.
• French tax appeal: outcome of the six-month review window and any next steps if it moves to court.
• Berlin refinance: terms secured ahead of June 2026, now supported by Hornbach’s 2037 lease.
• Lease re-gears in pipeline: discussions with Nestlé’s Cereal Partners, Land Baden-Württemberg and Stellantis – together these touch c.13% of income.
• Dividend cover: trajectory of EPRA earnings as Frankfurt disposal washes through and new leases ramp.

Bottom line

SEREIT has delivered a steady year in choppy markets: income is doing the heavy lifting, the balance sheet is robust, and the team is delivering practical leasing wins. The two headline risks are well explained and ring-fenced where possible. If management can defuse Apeldoorn and clear the French tax cloud, today’s yield and the persistent NAV discount give plenty for patient investors to work with. Until then, expect the market to keep both eyes on those milestones.