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Custodian REIT plc (CREI)

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Tuesday 30 April, 2019

Custodian REIT plc

Custodian REIT plc : Unaudited Net Asset Value as at 31 March 2019

Custodian REIT plc (CREI)
Custodian REIT plc : Unaudited Net Asset Value as at 31 March 2019

30-Apr-2019 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.


30 April 2019

Custodian REIT plc


("Custodian REIT" or "the Company")


Unaudited Net Asset Value as at 31 March 2019


Custodian REIT (LSE: CREI), the UK commercial real estate investment company, today reports its unaudited net asset value ("NAV") as at 31 March 2019 and highlights for the period from 1 January 2019 to 31 March 2019 ("the Period").


Financial highlights


  • NAV total return per share1 for the year ended 31 March 2019 ("FY19") of 5.9% (year ended 31 March 2018 ("FY18"): 9.6%), comprising 6.1% income (FY18: 6.2%) and a 0.2% capital decrease (FY18: 3.4% capital increase)
  • NAV per share of 107.1p (31 December 2018: 108.1p)
  • NAV of £426.6m (31 December 2018: also £426.6m)
  • FY19 EPRA earnings per share2 7.3p (FY18: 6.9p)
  • Target dividend per share3 for the year ending 31 March 2020 increased 1.5% to 6.65p (FY19: 6.55p)
  • Net gearing4 of 24.1% loan-to-value (31 December 2018: 24.7%)
  • £4.1m of new equity raised during the Period at an average premium of 8.0% to dividend adjusted NAV per share
  • Market capitalisation of £442.8m (31 December 2018: £460.1m)


Portfolio highlights


  • Portfolio value of £572.7m (31 December 2018: £576.2m)
  • £1.4m valuation increase from successful asset management initiatives
  • £5.0m overall valuation decrease (0.9% of portfolio)
  • EPRA occupancy5 95.9% (31 December 2018: 96.5%)


1 NAV per share movement including dividends paid and approved for the period.

2 Profit after tax excluding net gains on investment property and one-off costs divided by weighted average number of shares in issue.

3 Dividends paid and approved relating to the year.

4 Gross borrowings less unrestricted cash divided by portfolio valuation.

5 Estimated rental value ("ERV") of let property divided by total portfolio ERV.


Net asset value


The unaudited NAV of the Company at 31 March 2019 was £426.6m, reflecting approximately 107.1p per share, a decrease of 1.0p (0.9%) since 31 December 2018:


Pence per share





NAV at 31 December 2018



Issue of equity (net of costs)






Valuation movements relating to:



 - Asset management activity



 - Other valuation movements



Net valuation movement






Income earned for the Period



Expenses and net finance costs for the Period



Dividends paid6






NAV at 31 March 2019




6 Dividends of 1.6375p per share were paid on shares in issue throughout the Period.


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 2019 and income for the Period but does not include any provision for the approved dividend of 1.6375p per share for the Period to be paid on 31 May 2019.


Commenting on the Company's performance during the Period, Richard Shepherd-Cross, Managing Director of Custodian Capital Limited (the Company's discretionary investment manager) said:


"In common with many participants in the UK property market the Company was circumspect in relation to investment during the Period, following on from much reduced activity through 2018.  In part this has been due to market pricing exceeding our expectations of value and in part due to limited opportunities in our target sectors.


"The net valuation movement of £5.0m represents a 0.9% decrease in the value of the portfolio during the Period.  This valuation decrease was driven by high street retail valuations falling by £5.2m, primarily due to the reduction in ERVs at 17 of the Company's 33 high street retail assets, based on recent transactional evidence.  Sentiment in the UK property market has moved quite quickly since September 2018, most notably against retail, and perhaps a correction was a necessary and an important part of a functioning market.  Some of this negative movement may be recovered following the conclusion of lease re-negotiations which are underway or under consideration, although we cannot rule out further falls in confidence in the property market from general economic or political turbulence.  We believe our strategy of focusing on sustainable income will support future dividends through any market volatility and deliver capital growth for shareholders over the long-term."


Asset management


A continued 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 £1.4m valuation increase in the Period, primarily due to:


  • Agreeing a new 10 year reversionary lease with Revlon International Corporation for an industrial unit in Stone, with annual rent increasing by 24% to £398k and valuation increasing by £0.7m;
  • Agreeing a new 10 year lease with Age Scotland at Causewayside House, Edinburgh where the tenant expanded its letting to take the whole first floor office suite, increasing the annual rent by 44% to £157k and the valuation by £0.4m;
  • Documenting a 10 year reversionary lease with Synertec at Leacroft Road, Warrington, extending the lease expiry from July 2022 to July 2032 and increasing the valuation by £0.2m; and
  • Agreeing a new lease for additional external seating with Chokdee Limited (t/a Giggling Squid) at a restaurant in Bath, with annual rent increasing by 12% to £135k and valuation increasing by £0.1m.


Further initiatives on other properties currently under review are expected to complete during the current quarter.  These positive asset management outcomes have been tempered by the company voluntary arrangement ("CVA") of Paperchase decreasing annual rent at the Company's Shrewsbury property by 45% from £150k to £83k, resulting in a £0.4m valuation decrease.


The portfolio's weighted average unexpired lease term to first break or expiry ("WAULT") decreased from 5.8 years at 31 December 2018 to 5.6 years at the Period end, reflecting principally the natural elapse of a quarter of a year due to the passage of time.


Property market


Commenting on the commercial property market outside London, Richard Shepherd-Cross said:


"Investment activity across the UK, as reported by JLL's UK capital market research, is down 15% in Q1 2019, equivalent to nearly £2bn, as investors reflect on the political and economic uncertainties.  However, it is understood that there is a significant weight of capital still targeting UK commercial property.  Investors appear to want to see prices fall before they commit but, with vendors not motivated to sell, this caution is contributing to low investment volumes.


"There are a number of events that might change the prevailing market:  The first would be a conclusion on Brexit, with an 'acceptable' outcome potentially boosting investor confidence.


"The second might be continued political uncertainty unbalancing the equilibrium of the economy leading to a repeat of the redemption crisis experienced by open-ended property funds in the wake of the EU referendum in the summer of 2016.  While there have been net outflows from these funds over recent months, the flow has not become a flood.  Fund managers are bolstering their cash reserves with selective asset sales, but not at sufficiently reduced prices to tempt investors back in meaningful volumes.


"A third issue could be a further deterioration in the retail trade and retail investment values, leading to a general contagion across other sectors.  It is acknowledged that the UK has too many shops and retailers are actively reducing the size of their store portfolios while acknowledging that physical stores remain a very important part of their sales proposition and a key interface with the customer.  This reduction in store portfolios is not all about on-line retailing, although on-line is clearly having a real impact.  As shopping habits evolve retailers need to be flexible enough to meet those changing requirements and landlords may need to accept that retailers will need greater flexibility.


"Retail is an unfolding story but the short-term impact on retail property investment is being felt keenly by investors.  The long-term picture for retail is likely to be polarised.  Prime and good secondary locations will remain popular with retailers and investors alike, although rents may need to adjust downwards.  Poor secondary retail locations may need to be re-purposed into residential, leisure or other uses.


"Despite many negative predictions for the UK economy in the face of Brexit or even as a result of Brexit indecision, to date the economy has defied the sceptics.  GDP continues to grow and unemployment is at a 44 year low.  Both of these indicators are positive for commercial property.


"Across all regions of the UK the industrial and logistics sector is delivering new buildings to the market.  For 'big box' (100,000 sq ft plus) we have witnessed an increase in speculative development as developers try to exploit demand and the relative lack of supply.  Up to 50% of all big box was speculatively developed last year and it was e-commerce, food and 'other retailers' who dominated the new lettings.


"After five years of focus on big box logistics the market has identified the lack of supply of smaller buildings and for the first time in recent years we have started to see development focused on this sector.  One area of the letting market that has not fully matured is urban logistics.  Meeting the challenge of on-line sales fulfillment is going to see demand for in-town or suburban logistics buildings.  At present such buildings do not exist or are in short supply as rental levels are not high enough to bring forward new development, but the potential for rental growth in this sub-sector is very real.  The Company's portfolio is well positioned to exploit this rental growth, with 19% of its assets in the industrial/logistics sub-sector which continues to be a target for selective acquisitions.


"The good news is not restricted to industrial/logistics.  Regional office markets have also performed well, demonstrating rental growth.  Again it is lack of supply combined with strength in regional economies that has driven this growth and the pipeline of new development continues to look restricted.  New office lettings across all regional markets were 10% above the five year average during 2018."


Portfolio analysis


At 31 March 2019 the Company's property portfolio comprised 155 assets (31 December 2018: 155 assets) with a net initial yield7 ("NIY") of 6.6% (31 December 2018: 6.6%).  The portfolio is split between the main commercial property sectors, in line with the Company's objective to maintain a suitably balanced investment portfolio.  Slight swings in sector weightings reflect market pricing at any given time and the desire to maintain an opportunistic approach to acquisitions.  Sector weightings are shown below:


7 Passing rent divided by property valuation plus purchaser's costs.









 31 Mar 2019


Period valuation movement


Weighting by income8 31 Mar 2019

Weighting by income8 31 Dec 2018















Retail warehouse














High street retail





























8 Current passing rent plus ERV of vacant properties.

9 Includes car showrooms, petrol filling stations, children's day nurseries, restaurants, gymnasiums, hotels and healthcare units.


Diversification across sectors helps to remove volatility from the portfolio, as demonstrated in the Period with the Industrial sector of the portfolio seeing a £1.9m valuation increase.


Despite a £1.4m valuation decrease in the valuation of retail warehouse assets during the Period, we believe low rents per sq ft, 'big box' formats, free parking and a complimentary relationship with on-line through continued growth in 'click-and-collect' mean valuations and rents are likely to remain more robust than the High Street.


The Company also 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 2019 was as follows:








 31 Mar 2019


Period valuation movement


by income10
31 Mar

by income10
31 Dec 2018








West Midlands




























East Midlands


















































10 Current passing rent plus ERV of vacant properties.


For details of all properties in the portfolio please see


Activity and pipeline


Commenting on pipeline, Richard Shepherd-Cross said:


"We are considering a pipeline of opportunities and believe there may be potential to make contra-cyclical acquisitions where we believe that short-term market weakness can unlock long-term value for the Company."






The Company issued 3.6m new ordinary shares of 1p each ("the New Shares") during the Period raising £4.1m.  The New Shares were issued at a premium of 8.0% to the unaudited NAV per share at 31 December 2018, adjusted to exclude the dividend paid on 28 February 2019.




At the Period end the Company had:


  • A £45m revolving credit facility ("RCF") with Lloyds Bank plc with interest of 2.45% above three-month LIBOR of which £10m expires on 30 June 2019 and £35m expires on 13 November 2020;
  • A £20m term loan with Scottish Widows plc with interest fixed at 3.935% and is repayable on 13 August 2025;
  • A £45m term loan with Scottish Widows plc with interest fixed at 2.987% and is repayable on 5 June 2028; and
  • A £50m term loan with Aviva Investors Real Estate Finance comprising:

i)        A £35m tranche repayable on 6 April 2032 with fixed annual interest of 3.02%; and

ii)       A £15m tranche repayable on 3 November 2032 with fixed annual interest of 3.26%.


On 14 January 2019, the Company increased the RCF facility from £35m to £45m until 30 June 2019 to provide the Company with additional capacity for property acquisitions.




An interim dividend of 1.6375p per share for the quarter ended 31 December 2018 was paid on 28 February 2019.  The Board has approved an interim dividend relating to the Period of 1.6375p per share payable on 31 May 2019 to shareholders on the register on 26 April 2019.


In the absence of unforeseen circumstances, the Board intends to pay quarterly dividends to achieve a target dividend11 per share for the year ending 31 March 2020 of 6.65p (FY19: 6.55p).  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.


11 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.


- Ends -


Further information:


Further information regarding the Company can be found at the Company's website or please contact:


Custodian Capital Limited


Richard Shepherd-Cross / Nathan Imlach / Ian Mattioli MBE

Tel: +44 (0)116 240 8740


Numis Securities Limited


Hugh Jonathan / Nathan Brown

Tel: +44 (0)20 7260 1000




Ed Gascoigne-Pees

Tel: +44 (0)20 3757 4984


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 £10m 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 £10m 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 and

Category Code: MSCH
LEI Code: 2138001BOD1J5XK1CX76
OAM Categories: 3.1. Additional regulated information required to be disclosed under the laws of a Member State
Sequence No.: 8424
EQS News ID: 804877

End of Announcement EQS News Service


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