Custodian REIT plc (CREI) Custodian REIT plc : Unaudited net
asset value as at 31 March 2022 10-May-2022 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS
Group. The issuer is solely responsible for the content of this
announcement.
-----------------------------------------------------------------------------------------------------------------------
10 May 2022
Custodian REIT plc
("Custodian REIT" or "the Company")
Unaudited net asset value as at 31 March 2022
Custodian REIT (LSE: CREI), the UK commercial real estate
investment company focused on smaller lot-sizes, today reports its
unaudited net asset value ("NAV") as at 31 March 2022 and
highlights for the period from 1 January 2022 to 31 March 2022
("the Period").
Company summary
The Company's GBP0.7bn portfolio comprises 160 smaller lot-sized
regional commercial properties diversified by sector, tenant,
location and lease length and offers investors a prospective 5.5%
income return1 with the potential for capital growth. The portfolio
is conservatively geared with a target 25% loan-to-value paying
aggregate interest of below 3% on its majority fixed-rate debt
facilities. The Board's objective is to grow the dividend on a
sustainable basis whilst satisfying the Company's environmental,
social and governance targets and create long term value for the
Company's stakeholders.
Financial highlights
Dividends
-- Dividend per share approved for the Period of 1.375p
-- Aggregate dividends per share declared relating to the year
ended 31 March 2022 ("FY22") of 5.25p (2021:5.0p)
-- Target dividends per share of no less than 5.5p for the year
ending 31 March 2023
Earnings
-- EPRA earnings per share2 ("EPS") for the Period of 1.6p and
for FY22 increasing to 5.9p (2021: 5.6p)primarily due to a GBP0.3m
decrease in the doubtful debt provision during the year (2021:
GBP2.7m increase)
-- EPRA EPS 110%3 covered the FY22 dividend (2021: 113%)
-- The accretive acquisition of DRUM Income Plus REIT plc
("DRUM") in November 2021 has delivered anannualised 11p of EPRA
earnings per new share issued in consideration since acquisition,
with DRUM's portfoliovaluation remaining steady at GBP49m
NAV
-- NAV total return per share4 of:? 6.4% for the Period
comprising 1.2% dividends paid and a 5.2% capital increase ? 28.4%
for FY22 (2021: 0.9%) comprising 5.8% dividends paid (2021: 4.8%)
and a 22.6% capital increase(2021: 3.9% capital decrease)
-- NAV per share of 119.7p (31 December 2021: 113.7p, 31 March
2021: 97.6p)
-- NAV of GBP527.6m (31 December 2021: GBP501.4m)
Portfolio highlights
-- Property portfolio value of GBP665.2m (31 December 2021:
GBP637.9m)
-- GBP25.5m aggregate valuation increase for the Period
comprising:? GBP5.0m from successful asset management initiatives;
and ? GBP20.5m of general valuation increases, primarily in the
industrial and logistics and retail warehousesectors
-- GBP1.875m5 invested during the Period in an industrial unit
in Nottingham
-- Disposal of a high street retail unit in Norwich at valuation
for GBP1.3m
-- Net gearing6 decreased to 19.1% loan-to-value (31 March 2021:
24.9%) due to valuation increases of GBP94.0mover the last 12
months
-- EPRA occupancy7 decreased to 89.9% (31 March 2021: 91.6%)
-- Since the Period-end, GBP7.5m invested in an industrial
facility in Grangemouth
1 Target dividend per share for the year ending 31 March 2023 of
5.5p divided by the last available share price prior to publication
of 100.6p.
2 Profit after tax excluding net gains or losses on investment
property divided by weighted average number of shares in issue.
3 Profit after tax, excluding net gains or losses on investment
property, divided by dividends approved relating to the period.
4 NAV per share movement including dividends paid during the
Period.
5 Before acquisition costs.
6 Gross borrowings less cash (excluding rent deposits) divided
by portfolio valuation.
7 Estimated rental value ("ERV") of let property divided by
total portfolio ERV.
Net asset value
The unaudited NAV of Custodian REIT at 31 March 2022 was
GBP527.6m, reflecting approximately 119.7p per share, an increase
of 6.0p (5.3%) since 31 December 2021:
Pence per share GBPm
NAV at 31 December 2021 113.7 501.4
Valuation movements relating to:
- Asset management activity 1.1 5.0
- General valuation increases 4.7 20.5
Net valuation movement 5.8 25.5
Other movements - 0.2
Acquisition costs - (0.2)
5.8 25.5
EPRA earnings for the Period 1.6 6.8
Interim dividend paid8 during the Period (1.4) (6.1)
NAV at 31 March 2022 119.7 527.6
8 An interim dividend of 1.375p per share relating to the
quarter ended 31 December 2021 was paid on 28 February 2022.
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
2022 and net income for the Period. The movement in NAV reflects
the payment of an interim dividend of 1.375p per share during the
Period, but does not include any provision for the approved
dividend of 1.375p per share for the Period to be paid on 31 May
2022.
Investment Manager's commentary
UK property market
Market sentiment remains strongly positive for industrial and
logistics, notwithstanding recent uncertainty in the 'big-box'
sector caused by Amazon's announcement of excess warehouse
capacity. Positivity has emerged, post covid lockdowns, for central
London and major regional city offices and the retail warehouse
sector has challenged the general retail malaise. As we reported
last quarter there is a nascent recovery in sentiment towards high
street retail, but only in prime pitches and in leading retail
centres. So, with the exception of secondary retail, business park
offices and secondary leisure schemes, market demand is driving
values across the board which has led directly to the seventh
consecutive quarter of net asset value growth for Custodian
REIT.
Sector by sector Custodian REIT portfolio valuations have
broadly followed the wider market trends during the period with the
industrial and logistics valuation increasing by 6.5%, retail
warehousing increasing 3.5%, the 'other' sector increasing 1.8% and
high street retail increasing by 0.8%. The office portfolio saw no
valuation movement reflecting the 50% weighting to business park
offices but recent acquisitions have been focused on strong city
locations, having bought recently in both Manchester and Oxford,
where we are witnessing the strongest occupier and investor demand
and we believe the office portfolio is set fair to see growth.
Thematic investment continues to dominate fund raising and is
polarising property investment demand and pricing. The weight of
capital chasing the industrial and logistics sector and more
recently retail warehousing has led to some extraordinary yield
compression. While this drives NAV growth for existing investors,
income yields are being squeezed. In the long term, income
comprises 70%-80% of the total return from property so it makes
sense to target property investment that provides a higher level of
income. Custodian REIT's smaller-lot size specialism of targeting
the marginal income advantage (ie the additional income for the
same level of risk) of investing in smaller regional properties has
never been more accretive than in current market conditions.
While thematic investment, if focused on the right sectors, has
been demonstrably successful for active investors over the last two
years we do not believe the yield compression driven growth will
continue over the next two years. Therefore, a re-focus on
diversified strategies where managers can exploit mispricing in
sub-sectors of the office and retail market, and as stated above a
focus on income, is likely to deliver for investors.
Inflation
There is rightly a keen focus on inflation at present and
questions as to whether real estate investment can offer a degree
of inflation hedging. In short, the answer must be yes as rents
should grow over time, but with typically five-yearly rent reviews
and average unexpired lease terms of circa five years, investors
should not expect a straight-line relationship between rents and
inflation. Much focus is currently on RPI and CPI linked rent
reviews, which of course provide shorter-term comfort but can have
the effect of creating bond like investment characteristics with a
greater emphasis placed on tenant covenant than the property
fundamentals. At some point in a property's life cycle rents will
always be re-based to open market values. An over-reliance on index
linked rent reviews can lead to disparity between investment values
and underlying property values. Over the long term we do not feel
indexed rent reviews are a worthy substitute for owning good real
estate where we back open market rent reviews to deliver rental
growth. For long-term investors, such as Custodian REIT, the aim is
to provide inflation protection from the bricks and mortar, not the
lease contracts.
Earnings
EPRA earnings per share for FY22 increased to 5.9p (2021: 5.6p)
due primarily to a GBP0.3m decrease in the doubtful debt provision
(2021: GBP2.7m increase), reflecting an improved sentiment
regarding the collection of overdue rents.
Based on the most recent valuation, the Custodian REIT portfolio
is offering an aggregate 10% rental reversion on occupied
properties and a 20% reversion including vacant properties. This
latent increase to earnings should provide a useful buffer against
cost inflation and potentially increase dividend capacity once
crystallised.
We believe that earnings and earnings growth should be a much
higher profile metric when considering the relative pricing of
property investment companies' stock, rather than an over-reliance
on NAV based metrics. As Investment Manager, protecting and growing
earnings is much more of a focus than NAV growth, which is often
largely driven by market sentiment. As set out below this focus is
demonstrated in the recent asset management which has added to the
rent roll and secured additional cash flow over the short to medium
term.
Asset management
The Investment Manager has remained focused on active asset
management during the Period, completing the following
initiatives:
-- A new 10 year lease with a fifth year tenant break option
with DS Smith Packaging on a vacant industrialunit in Redditch with
an annual rent of GBP401k, increasing valuation by GBP3.5m;
-- A 10 year lease renewal with a fifth year tenant break option
with MTS Logistics on an industrial unit inBardon with a stepped
annual rent of GBP175k, rising to GBP205k, increasing valuation by
GBP0.8m;
-- A new 15 year lease without break with Pure Gym on a vacant
retail warehouse unit in Grantham with anannual rent of GBP90k,
increasing valuation by GBP0.3m;
-- A new five year lease with a fourth year tenant break option
with Carbide Properties (t/a TungstenProperties) on a vacant office
suite in Leicester with an annual rent of GBP78k, increasing
valuation by GBP0.2m;
-- A five year lease renewal with a third year tenant break
option with The Works on a retail unit in BurySt Edmunds with an
annual rent of GBP85k, increasing valuation by GBP0.2m;
-- A five year lease renewal with a third year tenant break
option with Superdrug on a retail unit inWeston-super-Mare with an
annual rent of GBP60k, with no impact on valuation;
-- A five year lease renewal without break with Holland and
Barrett on a retail unit in Shrewsbury with anannual rent of
GBP60k, with no impact on valuation; and
-- A new three year lease with Saima Rani Salon on a vacant
retail unit in Shrewsbury, with an annual rentof GBP15k, with no
impact on valuation.
Despite the positive impact of these initiatives EPRA occupancy
decreased to 89.9% (31 December 2021: 90.9%). Of the vacant space,
37% is currently under offer to let and a further 29% is planned
vacancy to enable redevelopment or refurbishment and once complete
we expected these new lettings and developments to enhance earnings
and deliver valuation increases in excess of capital
expenditure.
Dividends
During the Period the Company paid an interim dividend of 1.375p
per share relating to the quarter ended 31 December 2021 and
approved an interim dividend per share of 1.375p for the Period,
fully covered by EPRA earnings, achieving its target dividend per
share for the year ending 31 March 2022 of 5.25p. The Board is
targeting aggregate dividends per share9 of at least 5.5p for the
year ending 31 March 2023. The Board's objective is to grow the
dividend on a sustainable basis, at a rate which is fully covered
by net rental income and does not inhibit the flexibility of the
Company's investment strategy.
9 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.
Acquisitions
During the Period the Company invested GBP1.875m on a 24,134 sq
ft industrial unit on Moorgreen Industrial Park, Nottingham
occupied by Hickling & Squires commercial printers. The unit
has a passing rent of GBP130k per annum, reflecting a net initial
yield10 ("NIY") of 6.53%.
Since the Period end the Company has acquired a 87k sq ft
industrial facility in Grangemouth for GBP7.5m occupied by
Thornbridge Sawmills with an annual passing rent of GBP388k,
reflecting a NIY of 5.5%.
10 Passing rent divided by property valuation plus purchaser's
costs.
Borrowings
Custodian REIT and its subsidiaries operate the following loan
facilities:
-- A GBP35m revolving credit facility ("RCF") with Lloyds Bank
plc ("Lloyds") expiring on 17 September 2024with interest of
between 1.5% and 1.8% above SONIA, determined by reference to the
prevailing LTV ratio of adiscrete security pool. The RCF facility
limit can be increased to a maximum of GBP50m with Lloyds'
approval;
-- A GBP25m RCF with The Royal Bank of Scotland ("RBS") expiring
on 30 September 2022 with interest of 1.75%above SONIA;
-- A GBP20m term loan with Scottish Widows plc ("SWIP")
repayable on 13 August 2025 with interest fixed at3.935%;
-- A GBP45m term loan with SWIP repayable on 5 June 2028 with
interest fixed at 2.987%; and
-- A GBP50m term loan with Aviva Investors Real Estate Finance
comprising:a. A GBP35m tranche repayable on 6 April 2032 with fixed
annual interest of 3.02%; and b. A GBP15m tranche repayable on 3
November 2032 with fixed annual interest of 3.26%.
Each facility has a discrete security pool, comprising a number
of individual properties, over which the relevant lender has
security and covenants:
-- The maximum LTV of the discrete security pool is between 45%
and 50%, with an overarching covenant on theproperty portfolio of a
maximum 35% LTV; and
-- Historical interest cover, requiring net rental receipts from
each discrete security pool, over thepreceding three months, to
exceed 250% of the facility's quarterly interest liability.
The Company and its subsidiaries complied with all loan
covenants during the Period.
The Company is in discussions with its lenders regarding
refinancing the GBP25m RBS facility ahead of its expiry later this
year.
Portfolio analysis
At 31 March 2022 the property portfolio comprised 160 assets
with a NIY of 5.7% (31 December 2021: 6.1%). The portfolio is split
between the main commercial property sectors, in line with the
Company's objective to maintain a suitably balanced investment
portfolio. Sector weightings are shown below:
Valuation
Period valuation
31 Mar movement Weighting by Weighting by
2022 Weighting by value 31 Period valuation income11 income11
Mar 2022 GBPm movement 31 Mar 2022 31 Dec 2021
GBPm
Sector
Industrial 324.5 49% 19.5 6.5% 38% 39%
Retail 125.4 19% 4.2 3.5% 21% 21%
warehouse
Office 88.1 13% - - 17% 16%
Other12 76.9 12% 1.4 1.8% 13% 12%
High street 50.3 7% 0.4 0.8% 11% 12%
retail
Total 665.2 100% 25.5 4.0% 100% 100%
11 Current passing rent plus ERV of vacant properties.
12 Comprises drive-through restaurants, car showrooms, trade
counters, gymnasiums, restaurants and leisure units.
The Company and its subsidiaries operate a geographically
diversified property portfolio across the UK, seeking to ensure
that no one region represents more than 50% of portfolio income.
The geographic analysis of the property portfolio at 31 March 2022
was as follows:
Valuation
Period valuation Weighting Weighting
31 Mar Weighting by value 31 Mar movement by income by income
2022 2022 Period valuation 11 11
GBPm movement 31 Mar 31 Dec
GBPm 2022 2021
Location
West Midlands 133.7 20% 8.5 6.8% 18% 18%
North-West 116.2 17% 1.8 1.6% 19% 19%
South-East 87.2 13% 4.2 5.0% 14% 13%
East Midlands 84.7 13% 4.1 5.3% 13% 13%
Scotland 72.5 11% 1.8 2.6% 10% 10%
North-East 65.5 10% 0.7 1.0% 12% 12%
South-West 65.5 10% 1.9 3.0% 9% 9%
Eastern 33.9 5% 2.5 7.9% 4% 5%
Wales 6.0 1% - - 1% 1%
Total 665.2 100% 25.5 4.0% 100% 100%
For details of all properties in the portfolio please see
custodianreit.com/property-portfolio.
Inside information
The Board is satisfied that any inside information which the
Directors and the Investment Manager may have has been notified to
a regulatory information service. The Directors and those closely
associated are therefore not prohibited from dealing in the
Company's shares during the closed period which ends on the date of
the announcement of the Annual Report for the year ended 31 March
2022.
- Ends -
Further information:
Further information regarding the Company can be found at the
Company's website custodianreit.com or please contact:
Custodian Capital Limited
Richard Shepherd-Cross / Ed Moore / Ian Mattioli MBE Tel: +44 (0)116 240 8740
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
principally 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 principally targeting sub GBP10m lot-size,
regional properties, the Company seeks 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 custodianreit.com and
custodiancapital.com.
-----------------------------------------------------------------------------------------------------------------------
ISIN: GB00BJFLFT45
Category Code: MSCH
TIDM: CREI
LEI Code: 2138001BOD1J5XK1CX76
Sequence No.: 160497
EQS News ID: 1347251
End of Announcement EQS News Service
=------------------------------------------------------------------------------------
Image link:
https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=show_t_gif&application_id=1347251&application_name=news
(END) Dow Jones Newswires
May 10, 2022 02:00 ET (06:00 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
