Stoneweg Europe Stapled Trust (SERT): 1H 2025 Financial Analysis and Strategic Review

Stoneweg Europe Stapled Trust (SERT) has released its 1H 2025 results, providing investors with an in-depth look at its financial performance, portfolio dynamics, and ongoing strategic repositioning. The Trust, listed in Singapore, is an actively managed portfolio of logistics, light industrial, prime office, and data centre assets across Western Europe and the Nordics. Below, we present a detailed analysis of key financial metrics, historical trends, major corporate actions, and strategic priorities as disclosed in the report.

Key Financial Metrics and Performance Comparison

Dividend Update

SERT declared a 1H 2025 DPS of 6.553 Euro cents, entirely as a capital component and representing an 8.3% annualised yield at the 8 August 2025 price of €1.58/security. This is a decrease from the 7.050 Euro cents DPS in 1H 2024, primarily attributed to higher finance costs following a €500 million green bond issue in January 2025.

Historical Performance Trends

• Net Property Income (NPI) grew 2.2% YoY, driven by redevelopments at Nervesa21 and Via dell’Industria 18 in Milan, and reversal of historical bad debt provisions.
• Like-for-like NPI increased 4.9%, with logistics/light industrial up 7.4%, office up 1.0%, and the “Other” segment up 19.7% due to strong turnover rent.
• Portfolio occupancy rose to 92.4%, with Western Europe at 93.3% and Central Europe at 87.4%. Logistics/light industrial occupancy improved to 94.4%.

Asset Valuation and Strategic Investments

• Asset Revaluation: Logistics/light industrial assets saw a 1.5% uplift over the past six months, driving a 1.1% overall portfolio valuation gain. Significant rent reversions and new leases have contributed to valuation gains in key assets.
• Strategic Investment: SERT made a €50 million investment in the AiOnX data centre development fund, which was immediately accretive, resulting in a €24.8 million (49.6%) fair value gain. The AiOnX fund has five early-stage hyperscale data centre sites across Europe, with a potential gross development value exceeding €30 billion.

Capital Management, Fundraising, and Divestments

• Bond Issue: €500 million six-year green bond issued in January 2025, extending WADE to 3.8 years. No debt maturities until late 2026.
• Net Gearing: Stood at 41.8%, below the Board’s ceiling of 45% and MAS limit of 50%. Pro forma net gearing expected to fall below 40% after planned asset divestments.
• Asset Sales: SERT is actively recycling capital, with further opportunistic asset sales identified to de-risk office and second-tier locations.
• Liquidity: €149.5 million of undrawn RCF supports strong liquidity.
• Share Buybacks: The security buyback programme was well received during recent market volatility, signaling Board confidence.

Portfolio and Leasing Highlights

• Sector Allocation: Logistics/light industrial sector now comprises 56% of portfolio, targeting >60% weighting. Prime office and data centre assets complement the portfolio.
• Leasing: Major lease renewals include a 20-year lease with NN Group NV in The Hague (+50% rent reversion), and long-term renewals in Italy and Denmark at >20% rent reversion.
• WALE: Weighted average lease expiry across the portfolio is 5.1 years, supporting cash flow visibility.
• Diversity: Tenant base highly diversified, with no single trade sector representing more than 16% of headline rent, and top 10 tenants accounting for only 20.4% of total rent.

Macroeconomic and Market Environment

• Eurozone GDP Growth: Forecast for 2025 revised up to 1.1% on benign inflation and lack of EU tariff retaliation. However, 2026 is expected to be muted, with stimulus anticipated from 2027 onward.
• US Tariffs: Recent US tariffs may suppress European industrial and logistics demand short-term, but could trigger more EU stimulus and ECB rate cuts, potentially leading to yield compression and supporting real estate valuations.
• Sector Fundamentals: Logistics vacancy rates remain below 5%, with tightening supply and rising prime rents. Grade A office vacancy in SERT’s key markets is 3.9%, well below the 8.6% average for all office grades.

Chairman’s Statement

“Active portfolio management to unlock value, generate alpha and deliver sustainable, risk adjusted returns. Active tenant engagement via SW local teams to navigate geopolitical/tariff uncertainty. Maintain high occupancy and long WALE. Execute leases with positive rent reversions. Progress key AEIs and redevelopments (such as Haagse Poort, Ruyterkade, Parc des Docks and AiOnX), delivering higher yield-on-cost and NAV upside. Manage net gearing within the Board’s policy range of 35-40% in the medium term. Enhance Fitch Ratings and S&P Global Ratings BBB- Investment grade ratings. Maintain ample liquidity, actively manage SERT’s debt book and expand capital market partnerships. Recycle non-strategic assets into superior risk-adjusted investment opportunities. Reposition for growth with the new sponsor’s pipeline supporting SERT’s current strategy to pivot further to logistics. Utilise the stapled REIT-BT structure for greater strategic flexibility, value enhancing and optimised tax framework. Progress asset-level ESG Initiatives with a focus on property-related sustainability capex and increase in renewable energy heading to zero carbon emissions by 2040. Maintain MSCI ESG “A” or higher rating and GRESB 4 stars / 83 points. Continue to meet or exceed all sustainability KPIs across debt facilities and green bonds.”

The statement has a positive tone, focused on growth, sustainability, disciplined capital management, and the benefits of strategic flexibility.

Outlook and Exceptional Events

• Transformation: SERT is now a stapled trust, combining a REIT and a business trust for enhanced tax efficiency and portfolio flexibility.
• Exceptional Gains: Immediate fair value gain from AiOnX data centre investment.
• No major legal disputes or natural disasters reported in the period.
• Potential impact from macroeconomic policy shifts (US tariffs, ECB rate cuts).

Conclusion & Investment Recommendation

Performance Assessment: SERT’s overall financial performance appears strong on the asset and operational front, with positive NPI growth, stable occupancy, and successful strategic repositioning. The Trust remains resilient amidst macroeconomic headwinds, supported by sector tailwinds in logistics and prime offices, and a diversified, high-quality portfolio. However, distribution per stapled security declined due to higher interest costs from refinancing, and macroeconomic uncertainty persists.

For Current Holders: Investors currently holding SERT should consider maintaining their position. The Trust offers attractive yield, strong asset management execution, and is well positioned for long-term growth in high-demand sectors, especially logistics and data centres. Management’s strategic focus and capital discipline support resilience, and upside could come from further asset revaluation, successful redevelopments, and market recovery.

For Prospective Investors: Those not currently holding may consider initiating a position, especially as SERT trades at a ~23% discount to NAV and offers an annualised yield of ~8.3%. The Trust’s proactive capital management, sector focus, and operational performance make it a compelling value opportunity, though investors should be aware of macroeconomic uncertainties and the potential for short-term earnings volatility.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should consider their own financial situation and risk tolerance before making investment decisions. Past performance is not indicative of future results, and all investments carry risk, including the loss of principal.

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