TIDMCREI
RNS Number : 1827D
Custodian REIT PLC
25 April 2017
25 April 2017
Custodian REIT plc
("Custodian REIT" or "the Company")
Unaudited Net Asset Value as at 31 March 2017
Custodian REIT (LSE: CREI), the UK commercial real estate
investment company, today reports its unaudited net asset value
("NAV") as at 31 March 2017 and highlights for the period from 1
January 2017 to 31 March 2017 ("the Period").
Financial highlights
-- NAV total return per share(1) for the year ended 31 March
2017 ("FY17") of 8.5% (year ended 31 March 2016 ("FY16"): 6.2%)
-- FY17 EPRA earnings per share(2) 6.6p (FY16: 6.8p)
-- Target dividend per share for the year ending 31 March 2018
("FY18") increased to 6.45p (FY17(3) : 6.35p, FY16: 6.25p)
-- NAV per share of 103.8p (31 December 2016: 101.9p)
-- NAV of GBP351.9m (31 December 2016: GBP329.6m)
-- Net gearing(4) of 14.5% loan-to-value (31 December 2016: 17.8%)
-- GBP16.7m(5) of new equity raised during the Period at an
average premium of 7.7% to dividend adjusted NAV per share at 31
December 2016
-- Market capitalisation of GBP379.7m (31 December 2016: GBP353.4m)
-- Since the Period end, completion of a GBP50m, 15 year term
loan facility with the first tranche of GBP35m drawn down, with
interest fixed at 3.02% per annum
Portfolio highlights
-- Portfolio value of GBP415.8m (31 December 2016: GBP407.9m)
-- GBP4.6m valuation increase from successful asset management initiatives
-- EPRA occupancy(6) 98.6% (31 December 2016: 98.4%)
-- GBP13.5m(7) invested in two property acquisitions and one on-going development
-- GBP1.2m profit on disposal of three properties for consideration of GBP11.4m
-- GBP17.4m committed pipeline of property acquisitions
(1) NAV movement including FY17 dividends paid and approved on
shares in issue at 31 March 2016.
(2) Profit after tax excluding net gains on investment
properties divided by weighted average number of shares in
issue.
(3) Dividends paid and approved relating to FY17.
(4) Gross borrowings less unrestricted cash divided by portfolio
valuation.
(5) Before costs and expenses of GBP0.2m.
(6) Estimated rental value ("ERV") of let property divided by
total portfolio ERV.
(7) Before acquisition costs of GBP0.8m.
Net asset value
The unaudited NAV of the Company at 31 March 2017 was GBP351.9m,
reflecting approximately 103.8p per share, an increase of 1.9%
since 31 December 2016:
Pence
per share GBPm
----------------------------------------- --------------- ----------
NAV at 31 December 2016 101.9 329.6
Issue of equity (net of costs) 0.2 16.5
102.1 346.1
Valuation movements relating to:
- Asset management activity 1.4 4.6
- Profit on disposal of investment
properties 0.3 1.2
- Other valuation movements 0.0 0.2
----------------------------------------- --------------- ----------
1.7 6.0
Acquisition costs (0.2) (0.8)
Net valuation movement 1.5 5.2
Income earned for the Period 2.3 7.8
Expenses and net finance costs for
the Period (0.6) (2.1)
Dividends paid(8) (1.5) (5.1)
NAV at 31 March 2017 103.8 351.9
----------------------------------------- --------------- ----------
(8) Dividends of 1.5875p per share were paid on shares in issue
throughout the Period. Dividends paid on shares in issue at the end
of the Period averaged 1.5p per share due to new shares being
issued ex-dividend.
During the Period the initial costs (primarily stamp duty) of
investing GBP13.5m in new property acquisitions and an ongoing
development diluted NAV per share total return by 0.2p, was more
than offset by raising GBP16.5m (net of costs) at an average 7.7%
premium to dividend adjusted NAV, which added 0.3p per share(9)
.
The NAV attributable to the ordinary shares of the Company is
calculated under International Financial Reporting Standards and
incorporates the independent portfolio valuation as at 31 March
2017 and income for the Period, but does not include any provision
for the approved dividend for the Period, to be paid on 30 June
2017.
(9) 0.2p per share through new issuance plus 0.1p per share
notional dividend saving due to new shares being issued
ex-dividend.
The Company completed the following acquisitions during the
Period:
-- A block of six retail properties and two restaurants in
Shrewsbury with occupiers including Paperchase, Holland &
Barrett, ASK, Thomas Cook, Greggs and William Hill for GBP10.3m,
with a net initial yield ("NIY") of 6.07%; and
-- A high street retail unit in Chester occupied by Ernest Jones
and Lakeland for GBP2.75m, with a NIY of 4.78%. The unit adjoins
two properties held by Custodian REIT, providing a 'marriage value'
which resulted in an overall valuation increase for the combined
lot at 31 March 2017.
Asset management
Our continuing focus on active asset management including rent
reviews, new lettings, lease extensions and the retention of
tenants beyond their contractual break clauses resulted in a
GBP4.6m valuation increase, with further initiatives expected to
complete in the coming months.
These strategies have also had a positive impact on the
portfolio's weighted average unexpired lease term to the first
lease break or expiry ("WAULT"), which only decreased to 5.9 years
from 6.0 years at 31 December 2016.
Key asset management initiatives undertaken during the Period
include:
-- Extending Assa Abloy's lease at Cannock Road, Wolverhampton
with expiry moving from July 2018 to July 2023 and annual rent
increasing by 42% from GBP0.36m to GBP0.512m, increasing valuation
by GBP1.6m;
-- Extending DX Network's lease at Harrington Way, Nuneaton with
expiry moving from August 2016 to March 2022 and rent increasing by
10%, increasing valuation by GBP1.0m;
-- Letting a vacant unit in Gateshead to Jump Arena on a 15 year
lease at a rent of GBP0.16m per annum, increasing valuation by
GBP0.5m;
-- Removing a January 2018 break clause in Pets at Home's lease
in Winnersh increasing WAULT from 0.7 years to 10.7 years,
increasing valuation by GBP0.4m;
-- Extending DHL's lease at Dyce Drive, Aberdeen with expiry
moving from February 2017 to February 2022 and rent increasing by
7%, increasing valuation by GBP0.4m;
-- Removing a 2020 break clause in Pizza Hut's lease in Crewe
increasing WAULT to 13 years and valuation by GBP0.3m; and
-- Letting a trade counter unit at Counterpoint, Crewe to
Edmunson Electrical on a 10 year lease following the simultaneous
surrender of the former tenant's lease, increasing WAULT from 0.3
years to 10 years and increasing valuation by GBP0.2m.
The Company disposed of the following properties during the
Period for GBP11.4m:
-- Wetherspoons public house in Southsea for GBP1.67m, GBP0.2m ahead of valuation;
-- Toyota car dealership in Peterborough for GBP2.75m, GBP0.3m ahead of valuation; and
-- Bentley car dealership in Knutsford for GBP7.0m, GBP0.7m ahead of valuation.
Each disposal was made above purchase price and the latest
valuation, with an average NIY on disposal of 5.6%. The Company
intends to redeploy the sale proceeds on property with better
short-term income growth and long-term capital growth
potential.
Property market
Commenting on the commercial property market, Richard
Shepherd-Cross, Managing Director of Custodian Capital Limited (the
Company's discretionary investment manager) said:
"The imbalance between supply and demand seen in the fourth
quarter of 2016 has so far persisted into 2017. Supply remains
tight as a result of less selling from the open-ended funds, who
typically account for a significant proportion of market activity,
with potential sellers generally more concerned with how they might
re-invest any capital receipts.
"This is coupled with a high level of demand from a broad cross
section of the market because:
-- Overseas investors, encouraged by currency arbitrage and
perhaps the relative instability of their domestic markets,
continue to pursue central London markets and prime regional
cities;
-- Private investors have been targeting smaller lot size
property for its stability and income credentials, driven by the
very low returns available on cash;
-- New funds have been established to target properties with
long-term secure leases and index-linked rent reviews in an attempt
to meet the market demand for income, creating competitive demand
and hardening prices as a result;
-- There has been a general acceptance that the EU referendum
has not called time on the underlying fundamental benefits of UK
property investment;
-- Occupational market dynamics, with demand outstripping supply
and limited new development, have continued to drive rental growth
particularly in regional markets; and
-- There has been a clear bias in the market for industrial
property, which is driving price inflation in this sector.
"In essence, many of the key planks of Custodian REIT's
investment strategy: income, regional markets, sub-GBP10m lots, a
preference for industrial, and a focus on occupational market
dynamics have all come centre stage.
"Despite this strong competition in the market, we were
delighted to invest GBP13.5m (before acquisition costs) during the
Period on two high quality acquisitions and an ongoing
development."
Activity and pipeline
Commenting on pipeline, Richard Shepherd-Cross said:
"Custodian REIT completed GBP105m of acquisitions (before
acquisition costs) in FY17, demonstrating our continued confidence
in the market. Despite the competitive market, we have access to a
strengthening pipeline and have a track record of committing
available capital promptly to the property market. We are
considering a number of current opportunities and have a committed
pipeline of GBP17.4m.
"We sold three properties during the Period, in two cases to
owner occupiers and the other to take advantage of the pricing
arbitrage for long term secure income. Monies realised will be
re-invested in our core GBP2-10m lot size assets where we can
identify sectors or locations which have fundamentally strong
occupational characteristics or which have yet to witness
significant price inflation."
Financing
Equity
The Company issued 15.5m new ordinary shares of 1p each in the
capital of the Company during the Period ("the New Shares") raising
GBP16.7m (before costs and expenses). The New Shares were issued at
an average premium of 7.7% to the unaudited NAV per share at 31
December 2016, adjusted to exclude the dividend paid on 31 March
2017.
Debt
At the Period end the Company operated:
-- A GBP35m revolving credit facility ("RCF") with Lloyds Bank
plc, which attracts interest of 2.45% above three month LIBOR and
expires on 13 November 2020;
-- A GBP20m term loan with Scottish Widows plc, which attracts
interest fixed at 3.935% and is repayable on 13 August 2025;
and
-- A GBP45m term loan facility with Scottish Widows plc which
attracts interest fixed at 2.987% and is repayable on 5 June
2028.
On 5 April 2017, the Company and Aviva Investors Real Estate
Finance ("Aviva") entered into an agreement for Aviva to provide
the Company with a new GBP50m 15 year term loan facility ("the New
Loan"). The Company drew down the first tranche of GBP35m on 6
April 2017 with a fixed rate of interest of 3.02% per annum payable
on the balance.
The Company intends to use the proceeds from the New Loan to
acquire additional UK commercial real estate that can further
diversify the portfolio and enhance income yield.
Portfolio analysis
At 31 March 2017 the Company's property portfolio comprised 131
assets and 265 contractual tenants with a NIY(10) of 6.91% and
current passing rent of GBP30.7m per annum.
(10) Portfolio passing rent divided by portfolio valuation plus
estimated purchasers' costs of 6.5%.
The portfolio is split between the main commercial property
sectors, in line with the Company's objective to maintain a
suitably balanced investment portfolio, but with a relatively low
exposure to office and a relatively high exposure to industrial and
to alternative sectors, often referred to as 'other' in property
market analysis. Sector weightings are shown below:
Valuation Period Weighting Weighting
31 Mar valuation by income(11) by income(11)
2017 movement 31 Mar 31 Dec
Sector GBPm GBPm 2017 2016
---------------- -------------- --------------- ------------------- -------------------
Industrial 187.2 4.8 45% 45%
Retail 120.2 (0.5) 28%(12) 26%
Other(13) 56.4 0.5 13% 15%
Office 52.0 - 14% 14%
Total 415.8 4.8 100% 100%
------------------ -------------- --------------- ------------------- -------------------
(11) Current passing rent plus ERV of vacant properties.
(12) Comprises 17% high street and 11% retail warehouse.
(13) Includes car showrooms, petrol filling stations, children's
day nurseries, restaurants, gymnasiums, hotels and healthcare
units.
GBP3.7m of the GBP4.8m valuation increase in the industrial
sector was driven by asset management initiatives, with
occupational demand driving rental growth and generating positive
returns. As industrial property is less exposed to obsolescence
this sector is a very good fit with the Company's strategy.
Retail is split between high street and out-of-town retail
(retail warehousing). Strong comparison retail pitches in dominant
regional towns continue to show very low vacancy rates and offer
stable long-term cash flow, with the opportunity for rental growth.
Valuation decreases during the Period are primarily the result of
shortening leases combined with a level of over-rent. Retail
warehousing is witnessing close to record low vacancy rates as a
restricted planning policy and lack of development combined with
retailers' requirements to offer large format stores, free parking
and 'click and collect' to consumers.
While deemed to be outside the core sectors of office, retail
and industrial the 'other' sector offers diversification of income
without adding to portfolio risk, containing assets considered
mainstream but which typically have not been owned by institutional
investors. The 'other' sector has proved to be an out-performer
over the long-term and continues to be a target for
acquisitions.
Office rents are growing strongly and supply is constrained by a
lack of development and the extensive conversion of secondary
offices to residential making returns very attractive. However, the
Company's relatively low exposure to the office sector is a
long-term strategic decision rather than a short-term comment on
the state of the office market. We are conscious that obsolescence
can be a real cost of office ownership, which can hit cash flow and
be at odds with the Company's relatively high target dividend.
The Company operates a geographically diversified portfolio
across the UK, seeking to ensure that no one area represents the
majority of the portfolio. The geographic analysis of the Company's
portfolio at 31 March 2017 was as follows:
Weighting
Valuation by income(14) Weighting
Period valuation
31 Mar 2017 movement 31 Mar by income(14)
Location 31 Dec
GBPm GBPm 2017 2016
---------------- -------- -------- ------------------ --------------------- ---------------------- --------------------
West Midlands 85.6 2.5 20% 16%
South-East 79.1 0.3 17% 20%
North-West 61.1 1.1 15% 15%
East Midlands 45.4 (0.1) 12% 11%
South-West 41.6 0.1 9% 10%
North-East 35.4 0.5 9% 8%
Eastern 32.4 (0.1) 9% 10%
Scotland 30.2 0.5 8% 8%
Wales 5.0 - 1% 2%
Total 415.8 4.8 100% 100%
------------------------------------ ------------------ --------------------- ---------------------- --------------------
(14) Current passing rent plus ERV of vacant properties.
For details of all properties in the portfolio please see
www.custodianreit.com/property-portfolio.
Dividends
An interim dividend of 1.5875p per share for the quarter ended
31 December 2016 was paid on 31 March 2017. The Board has approved
an interim dividend relating to the Period of 1.5875p per share
payable on 30 June 2017 to shareholders on the register on 28 April
2017, which will achieve the FY17 target dividend per share of
6.35p.
In the absence of unforeseen circumstances, the Board intends to
pay quarterly dividends to achieve a target dividend(15) per share
for FY18 of 6.45p (FY17: 6.35p, FY16: 6.25p, FY15: 5.25p). The
Board's objective is to grow the dividend on a sustainable basis,
at a rate which is fully covered by projected net rental income and
does not inhibit the flexibility of the Company's investment
strategy.
The payment of quarterly dividends relating to FY18 will be
accelerated by one month to align more closely with London Stock
Exchange best practice and the Company's peer group. The dividend
relating to the quarter ending 30 June 2017 is therefore expected
to be paid on 31 August 2017.
(15) This is a target only and not a profit forecast. There can
be no assurance that the target can or will be met and it should
not be taken as an indication of the Company's expected or actual
future results. Accordingly, shareholders or potential investors in
the Company should not place any reliance on this target in
deciding whether or not to invest in the Company or assume that the
Company will make any distributions at all and should decide for
themselves whether or not the target dividend yield is reasonable
or achievable.
Activity since the Period end
Equity
On 4 April 2017 the Company issued 1m new ordinary shares of 1p
each in the capital of the Company raising GBP1.1m (before costs
and expenses), issued at a premium of 9.7% to the unaudited NAV per
share at 31 December 2016, adjusted to exclude the dividend paid on
31 March 2017.
Debt
On 5 April 2017, the Company entered into the New Loan,
comprising two tranches of GBP35m ("Tranche 1") and GBP15m
("Tranche 2"). The Company drew down Tranche 1 on 6 April 2017,
repayable on 6 April 2032 with a fixed rate of interest of 3.02%
per annum payable on the balance. Tranche 2 is available for draw
down on or before 5 October 2017 with a fixed rate of interest
payable on the balance, calculated at the same margin as Tranche 1
above the prevailing 15 year gilt rate on the date of draw
down.
The activity since the Period end has resulted in the Company
having uncommitted cash and agreed debt facilities of circa
GBP70m(16) .
(16) Comprising circa GBP20m of uncommitted cash, GBP35m RCF and
GBP15m Tranche 2.
- Ends -
Further information:
Further information regarding the Company can be found at the
Company's website www.custodianreit.com or please contact:
Custodian Capital Limited
Richard Shepherd-Cross / Nathan Imlach / Tel: +44 (0)116 240 8740
Ian Mattioli MBE
www.custodiancapital.com
Numis Securities Limited
Hugh Jonathan/Nathan Brown Tel: +44 (0)20 7260
1000
www.numis.com/funds
Camarco
Ed Gascoigne-Pees Tel: +44 (0)20 3757
4984
www.camarco.co.uk
Notes to Editors
Custodian REIT plc is a UK real estate investment trust, which
listed on the main market of the London Stock Exchange on 26 March
2014. Its portfolio comprises properties predominantly let to
institutional grade tenants on long leases throughout the UK and is
characterised by properties with individual values of less than
GBP10m at acquisition.
The Company offers investors the opportunity to access a
diversified portfolio of UK commercial real estate through a
closed-ended fund. By targeting sub GBP10m lot size, regional
properties, the Company intends to provide investors with an
attractive level of income with the potential for capital
growth.
Custodian Capital Limited is the discretionary investment
manager of the Company.
For more information visit www.custodianreit.com and
www.custodiancapital.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
NAVSEWFWLFWSEFL
(END) Dow Jones Newswires
April 25, 2017 02:01 ET (06:01 GMT)
Custodian Property Incom... (LSE:CREI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Custodian Property Incom... (LSE:CREI)
Historical Stock Chart
From Jul 2023 to Jul 2024
