REG-Custodian Property Income REIT plc Custodian Property Income REIT plc: Final results for the year ended 31 March 2025
12/06/2025 07:00
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Custodian Property Income REIT plc (CREI)
Custodian Property Income REIT plc: Final results for the year ended 31 March 2025
12-Jun-2025 / 07:00 GMT/BST
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12 June 2025
Custodian Property Income REIT plc
(“the Company” or “Custodian Property Income REIT”)
Final results for the year ended 31 March 2025
Strong operational performance driving earnings growth and portfolio valuation uplift
Custodian Property Income REIT (LSE: CREI), which seeks to deliver an enhanced income
return by investing in a diversified portfolio of smaller regional properties with
strong income characteristics across the UK, today announces its final results for the
year ended 31 March 2025.
Commenting on the final results, Richard Shepherd-Cross, Managing Director of the
Investment Manager, said: “The Company has delivered another strong year of operational
performance. Our strategy of investing in smaller lot sized properties leased to
institutional quality and household name occupiers has again led to our diversified
portfolio delivering the income growth it is designed to achieve. Against challenging
market conditions, we have delivered an average 29% rental increase at review, helping
drive growth in like-for-like rent of 2.3%. This has led to a 4.9% increase in earnings
per share and underpinned our fully covered dividend which offered an attractive yield
of 7.9% at 31 March 2025. With the portfolio’s estimated rental value 14% ahead of its
current passing rent, there remains a clear opportunity to continue to grow income.
“Throughout the year we continued to make disposals, achieving an average 5% premium to
the most recent valuation and 38% ahead of the assets’ pre-offer valuation, which both
supports the portfolio valuation and allows us to continue to recycle capital and
increase NAV.”
Commenting on the final results, David MacLellan, Chairman of the Company, said:
“Custodian Property Income REIT remains one of only a few active and genuinely
diversified property investment companies, and the Company’s differentiated property
strategy positions it well to continue to deliver for long-term investors seeking an
income focused opportunity.
“We have continued to look for ways to grow the portfolio in an environment where
raising capital via the stock exchange remains challenging and last week were pleased to
announce the acquisition of a meaningful commercial property portfolio that is highly
complementary to our own, both in terms of geographical spread and sector diversity. The
share based and net asset value (“NAV”)-for-NAV nature of this transaction allowed the
vendor to resolve a succession issue and a potentially significant capital gains tax
liability and, we believe, has provided a blueprint for other high net worth and family
offices to follow, while helping the Company achieve its ambitions for growth.
“As short-term interest rates fall and investors reconnect with real estate investment
for its attractive income credentials, the Company’s share price is well-placed to
re-rate back towards NAV and enhance total returns. In addition, with asset prices
showing signs of recovery and following the recent announcement of an all-share
portfolio acquisition, the Board looks to the future with confidence.”
Highlights of the year:
• 4.9% growth in EPRA earnings per share to 6.1p (FY24: 5.8p) with a 3.5% increase in
fully covered dividend per share to 6.0p reflecting a 7.9% dividend yield at 31
March 2025 (2024: 5.8p dividend, 7.2% yield)
• IFRS profit after tax increased to £38.2m (2024: £1.5m loss)
• 2.3% growth in like-for-like contractual rent to £43.9m
• Estimated rental value (“ERV”) grew 2.4%, with ERV 14% ahead of passing rent,
providing a significant opportunity to unlock further rental growth through asset
management and at lease events
• 15 rent reviews completed during the year across all sectors at an average 29% ahead
of previous passing rent, with 64 new lettings, lease renewals and lease regears
completed reflecting continued occupier demand
• Occupancy marginally decreased by 0.6% to 91.1% during the year (31 March 2024:
91.7%) but with lettings since the year end adding 0.4%
• Like-for-like valuation of the Company’s portfolio of 151 properties increased by
2.2% to £594.4m supporting a 2.9% NAV increase and contributing to a 9.5% NAV total
return (2024: -0.4%). Encouragingly valuations have improved at an accelerating
rate, quarter-on-quarter, as decreasing interest rates and real estate market
sentiment started to be reflected
• £8.2m of capital investment during the year into the refurbishment of offices in
Leeds and Manchester and industrial units in Livingston, Plymouth and Aberdeen, and
solar panel installations
• £15.1m proceeds from selective disposals achieved at an aggregate 38% premium to
pre-offer valuation, with a further £6.9m of disposals since year end at an
aggregate 12% premium to pre-offer valuation
• Net gearing remains low at 27.9% (31 March 2024: 29.2%) with 80% at a fixed rate of
interest. Since the year end the Company’s RCF limit has been increased from £50m
to £60m to maintain headroom following expected repayment of a £20m loan expiring in
August 2025
• Post year end, the Company completed the purchase of a £22.1m portfolio via the
all-share acquisition of a family property company. The ‘Merlin’ acquisition
provides the Company with a £19.4m portfolio of 28 smaller lot-size regional UK
investment properties which are highly complementary to the Company’s existing
assets, as well as c. £2.7m of newly built housing stock, the ongoing sale of which
is expected to conclude in the next few months, generating additional cash for the
Company.
Further information:
Further information regarding the Company can be found at the Company's website
1 custodianreit.com or please contact:
Custodian Capital Limited
Richard Shepherd-Cross – Managing Director
Ed Moore – Finance Director Tel: +44 (0)116 240 8740
Ian Mattioli MBE DL – Chairman
2 www.custodiancapital.com
Numis Securities Limited
Hugh Jonathan / George Shiel Tel: +44 (0)20 7260 1000
www.numis.com/funds
FTI Consulting
Richard Sunderland / Ellie Sweeney / Andrew Davis / Tel: +44 (0)20 3727 1000
Oliver Parsons
3 custodianreit@fticonsulting.com
Custodian Property Income REIT plc Annual Report and Accounts for the year ended 31
March 2025
Custodian Property Income REIT is a UK real estate investment trust (“REIT”) which seeks
to deliver an enhanced income return by investing in a diversified portfolio of smaller,
regional properties with strong income characteristics let to predominantly
institutional grade tenants across the UK.
Property highlights
2025
£m Comments
Portfolio value 594.4
• Investment property - £11.2m, representing a
2.2% like-for-like increase, explained
Valuation increases 4 1 : 11.9 further in the Investment Manager’s report
• Property, plant and equipment - £0.7m,
relating to solar panels
Occupancy rates have decreased from 91.7% to
Occupancy 91.1% 91.1% due to lease expiries in Q4 but partially
mitigated by new lettings since the year end
Primarily comprising:
• £2.6m extending and refurbishing an
industrial unit in Livingston
Capital investment 8.2 • £1.8m completing refurbishment works at three
office buildings in Leeds and Manchester
• £1.1m refurbishing industrial assets in
Plymouth and Aberdeen
• £1.3m invested in solar panels across nine
assets
At an aggregate 38% premium to pre-offer
valuation 5 2 comprising:
Disposal proceeds 15.1 • £9.0m vacant industrial unit in Warrington
• £2.3m vacant former car showroom in Redhill
• £1.8m vacant offices in Castle Donington
• £0.6m industrial unit in Sheffield
• £1.4m vacant offices in Solihull
At an aggregate 12% premium to pre-offer
valuation comprising:
Disposal proceeds since the year
end 6.9 • £4.0m part-let offices in Cheadle
• £2.9m fully-let offices in Cheadle
A portfolio of 28 smaller lot-sized investment
Acquisitions since the year end 22.1 properties through the corporate acquisition of
Merlin Properties Limited (“Merlin”)
Financial highlights and performance summary
2025 2024 Comments
Returns
Increased by 4.9% due to rental growth
*EPRA 6 3 earnings per 6.1p 5.8p and financing costs decreasing due to
share 7 4 base rate reductions and property
disposals
Basic and diluted earnings per 8.7p (0.3p) Profit resulting from a £11.2m investment
share 8 5 property valuation increase (2024: £27.0m
Profit/(loss) before tax (£m) 38.2 (1.5) valuation loss)
Dividends per share 9 6 6.0p 5.8p Target dividend per share for the year
ended 31 March 2026 of 6.0p
*Dividend cover 10 7 101.3% 100.7% In line with the Company’s policy of
paying fully covered dividends
*NAV total return per 6.6% dividends paid (2024: 5.5%) and a
share 11 8 9.5% (0.4%) 2.9% capital increase (2024: 5.9% capital
decrease)
Share price decreased from 81.4p to 76.2p
*Share price total return 12 9 1.2% (2.6%) during the year. Since the year-end
share price has increased to 84p
Capital values
NAV and *EPRA NTA 13 10 (£m) 423.5 411.8 Increased due to £11.9m of valuation
NAV per share and *NTA per share 96.1 93.4 gains
Reduced to 25.8% on a pro-forma basis
*Net gearing 14 11 27.9% 29.2% following acquisitions and disposals
since the year-end, broadly in line with
the Company’s 25% target
*Weighted average cost of drawn 3.9% 4.1% Base rate (SONIA) decreased from 5.2% to
debt facilities 4.5% during the year.
Costs
*Ongoing charges ratio 15 12 2.48% 2.20%
(“OCR”) Average quarterly NAV has decreased from
*OCR excluding direct property 1.30% 1.24% £423.6m in FY24 to £414.8m in FY25
expenses 16 13
Environmental
*Weighted average energy EPCs updated at certain units across 24
performance certificate (“EPC”) C (51) C (53) properties demonstrating continuing
rating 17 14 improvements in the environmental
performance of the portfolio
*Alternative performance measures (“APMs”) - the Company reports APMs to assist
stakeholders in assessing performance alongside the Company’s results on a statutory
basis, set out above. APMs are among the key performance indicators used by the Board
to assess the Company’s performance and are used by research analysts covering the
Company. The Company uses APMs based upon the EPRA Best Practice Recommendations
Reporting Framework which is widely recognised and used by public real estate
companies. Certain other APMs may not be directly comparable with other companies’
adjusted measures and APMs are not intended to be a substitute for, or superior to, any
IFRS measures of performance. Supporting calculations for APMs and reconciliations
between APMs and their IFRS equivalents are set out in Note 22.
Business model and strategy
Purpose
Custodian Property Income REIT offers investors access to a diversified portfolio of UK
commercial real estate through a closed-ended fund. The Company seeks to provide
investors with an attractive level of income and the potential for capital growth from a
portfolio with strong environmental credentials, becoming the REIT of choice for private
and institutional investors seeking high and stable dividends from well-diversified UK
real estate.
Stakeholder interests
The Board recognises the importance of all stakeholder interests, not just those of
investors, and keeps these at the forefront of business and strategic decisions,
ensuring the Company:
• Understands and meets the needs of its occupiers, owning fit for purpose properties
with strong environmental credentials in the right locations which comply with
regulations;
• Protects and improves its stable cash flows with long-term planning and decision
making, implementing its policy of paying dividends fully covered by recurring
earnings and securing the Company’s future; and
• Adopts a responsible approach to communities and the environment, actively seeking
ways to minimise the Company’s impact on climate change and providing the real
estate fabric of the economy, giving employers a place of business.
Investment Policy summary
The Company’s investment policy 18 15 is summarised below:
• To invest in a diverse portfolio of UK commercial real estate, principally
characterised by smaller, regional, core/core-plus 19 16 properties that provide
enhanced income;
• The property portfolio should be diversified by sector, location, tenant and lease
term, with a maximum weighting by income to any one property sector or geographic
region of 50%;
• To acquire modern buildings or those considered fit for purpose by occupiers,
focusing on areas with:
• High residual values;
• Strong local economies; and
• An imbalance between supply and demand.
• No one tenant or property should account for more than 10% of the rent roll at the
time of purchase, except for:
• Governmental bodies or departments; or
• Single tenants rated by Dun & Bradstreet as having a credit risk score worse than
two 20 17 , where exposure may not exceed 5% of the rent roll.
• Not to undertake speculative development, except for the refurbishment or
redevelopment of existing holdings;
• To seek further growth, which may involve strategic property portfolio acquisitions
and corporate consolidation; and
• The Company may use gearing provided that the maximum loan-to-value (“LTV”) shall
not exceed 35%, with a medium-term net gearing target of 25% LTV.
The Board reviews the Company’s investment objectives at least annually to ensure they
remain appropriate to the market in which the Company operates and in the best interests
of shareholders.
Differentiated property strategy
The Company’s portfolio is focused on smaller, regional assets which helps achieve our
target of high and stable dividends from well-diversified real estate by offering:
• An enhanced yield on acquisition – with no need to sacrifice quality of property,
location, tenant or environmental performance for income and with a greater share of
value in ‘bricks and mortar’ rather than the lease;
• Greater diversification – spreading risk across more assets, locations and tenants
and offering more stable cash flows; and
• A higher income component of total return – driving out-performance with
forecastable and predictable returns.
Success in achieving the Company’s performance and sustainability objectives is
primarily measured by performance against key performance indicators set out in detail
in the Financial review and ESG Committee reports respectively. The Principal risks and
uncertainties section of the Strategic Report sets out potential risks in achieving the
Company’s objectives.
Richard Shepherd-Cross, Managing Director of the Investment Manager, commented: "Our
smaller-lot specialism has consistently delivered significantly higher yields with lower
volatility without exposing shareholders to additional risk”.
Growth strategy
The Board is committed to seeking further growth in the Company to increase the
liquidity of its shares and reduce ongoing charges. Our growth strategy involves:
• Strategic property portfolio acquisitions and corporate consolidation, in particular
identifying portfolios held by family offices seeking a solution to succession and
latent tax issues;
• Organic growth through share issuance at a premium to NAV;
• Broadening the Company’s shareholder base, particularly through further penetration
into online platforms;
• Becoming the natural choice for private clients and wealth managers seeking to
invest in UK real estate; and
• Taking investor market share from open-ended funds and peer group companies being
wound down.
The Board ensures that property fundamentals are central to all decisions.
Diverse portfolio with institutional grade tenants
Weighting
by income
Weighting by income Location 31 March 2025
31 March 2025
West Midlands 20%
North-West 19%
Sector East Midlands 13%
Scotland 13%
Industrial 42% South-East 11%
Retail warehouse 22% South-West 10%
Office 16% North-East 9%
Other 13% Eastern 4%
High street retail 7% Wales 1%
Annual passing
rent % portfolio
income
(£m)
Top 10 tenants Asset locations
Menzies Distribution Aberdeen, Edinburgh, Glasgow, Ipswich, 1.7 3.9%
Norwich, Dundee, Swansea, York
Wickes Building Winnersh, Burton upon Trent,
Supplies Southport, Nottingham, Leighton 1.5 3.5%
Buzzard
B&M Retail Swindon, Ashton-under-Lyne, Plymouth, 1.4 3.1%
Carlisle
B&Q Banbury, Weymouth 1.0 2.3%
Matalan Leicester, Nottingham 1.0 2.2%
First Title (t/a Enact Leeds 0.9 2.1%
Conveyancing)
DFS Droitwich, Measham 0.9 2.0%
Zavvi Winsford 0.7 1.7%
Next Evesham, Motherwell 0.7 1.6%
Nicwood Logistics Burton upon Trent 0.6 1.5%
Experian tenant risk rating
31 March 2025 31 March 2024
Sector
Government 1% 2%
Very low risk 62% 57%
Low risk 11% 8%
Below average risk 11% 13%
Above average risk 5% 8%
High risk 1% 2%
Other 9% 10%
Our environmental, social and governance (“ESG”) objectives
• Improving the energy performance of our buildings - investing in carbon-reducing
technology, infrastructure and onsite renewables and ensuring redevelopments are
completed to high environmental standards which are essential to the future leasing
prospects and valuation of each property
• Reducing energy usage and emissions - liaising closely with our tenants to gather
and analyse data on the environmental performance of our properties to identify
areas for improvement
• Achieving positive social outcomes and supporting local communities - engaging
constructively with tenants and local government to ensure we support the wider
community through local economic and environmental plans and strategies and playing
our part in providing the real estate fabric of the economy, giving employers safe
places of business that promote tenant well-being
• Understanding environmental risks and opportunities - allowing the Board to maintain
appropriate governance structures to ensure the Investment Manager is appropriately
mitigating risks and maximising opportunities
• Complying with all requirements and reporting in line with best practice where
appropriate - exposing the Company to public scrutiny and communicating our targets,
activities and initiatives to stakeholders
• Governance - maintaining high standards of corporate governance and disclosure to
ensure the effective operation of the Company and instil confidence amongst our
stakeholders. We aim to continually improve our levels of governance and disclosure
to achieve industry best practice
Investment Manager
Custodian Capital Limited (“the Investment Manager”) is appointed under an investment
management agreement (“IMA”) to provide property management and administrative services
to the Company. Richard Shepherd-Cross is Managing Director of the Investment Manager.
Richard has 30 years’ experience in commercial property, qualifying as a Chartered
Surveyor in 1996 and until 2008 worked for JLL, latterly running its national portfolio
investment team.
Richard established Custodian Capital Limited as the Property Fund Management subsidiary
of Mattioli Woods Limited (“Mattioli Woods”) and in 2014 was instrumental in the launch
of Custodian Property Income REIT from Mattioli Woods’ syndicated property portfolio and
its 1,200 investors. Following the successful IPO of the Company, Richard has overseen
the growth of the Company to its current property portfolio of c. £600m.
Richard is supported by the Investment Manager’s other key personnel: Ed Moore - Finance
Director and Alex Nix - Assistant Investment Manager, along with a team of five other
surveyors and five accountants.
Chairman’s statement
A changing and more challenging global political landscape during the year has resulted
in tensions and uncertainty running high in parts of the world. In the UK, it is still
early days for the new Labour government but uncertainty is never good for any economy,
including the real estate sector.
While commercial property in the UK is showing signs of recovering value on the back of
increased occupier activity and growing rents, the share prices of listed real estate
companies do not yet reflect this recovery with many shares in these companies
continuing to trade at discounts to net asset values. As a result of these, in some
cases, quite wide discounts there has been increased corporate activity in the listed
real estate sector with mergers, take-privates and managed wind downs a feature of the
last twelve months following the arrival of more activist shareholders.
In my Chairman’s statement last year, I reflected that the Company could soon be one of
only a few active and genuinely diversified property investment companies available to
investors in the listed sector. It would appear that this reflection has proved
prescient, however, as I note in the following paragraphs, the Company is well
positioned with a diversified portfolio of performing real estate assets which are
providing a strong yield from a fully covered dividend.
Performance
Custodian Property Income REIT’s strategy is to invest in a diversified portfolio which,
at 31 March 2025, comprised 151 properties geographically spread throughout the UK and
across a diverse range of sectors. The year-end portfolio valuation reflected a net
yield (“NIY”) of 6.6% 21 18 (31 March 2024: 6.6%). With an average property value of
c.£4m and no one tenant or property accounting for more than 3.9% or 1.75% of the
Company’s rent roll respectively, property specific risk and tenant default risk are
significantly mitigated.
The Company’s NAV increased by 2.9% during the year, contributing to a 9.5% NAV total
return, and at an accelerating rate, quarter-on-quarter, as the impact of decreasing
interest rates and real estate market sentiment started to be reflected in valuations.
However, this positive underlying property portfolio performance does not yet appear to
be reflected in the share price performance and it is disappointing that the share price
total return for the year is only 1.2% which lags the NAV total return of 9.5% (2.9%
capital growth and 6.6% income).
One of the challenges of the performance for listed real estate over the last 12 months
has been the rise in the 10-year gilt yield, which has always been correlated to listed
real estate ratings. The 10-year gilt yield rose from 4.0% in March 2024, to 4.9% in
January 2025, and was 4.6% at the year end. This historically high and volatile rate
has had a direct impact on ratings, but set against Custodian Property Income REIT’s
dividend yield as at 31 March 2025 of 7.9%, fully covered by earnings and supported by
rental growth and a falling cost of variable rate debt, this appears to be a generous
margin.
Custodian Property Income REIT employs sector expertise, with high quality asset
management, covenant management and portfolio construction, to provide an institutional
offering to shareholders in a diversified regional portfolio, that generates a superior
income return. Notwithstanding recent volatility in pricing and acknowledging that 2024
witnessed the bottom of a property valuation cycle, the Company can still look back over
an average annual NAV total return of 5.6% in the 11 years since IPO, driven by strong
recurring earnings with fully covered dividends.
The NAV of the Company at 31 March 2025 was £423.5m, approximately 96.1p per share:
Pence per share £m
NAV at 31 March 2024 93.4 411.8
Valuation increases and depreciation 2.7 11.7
Profit on disposal of investment property 0.1 0.4
Net gain on property portfolio 2.8 12.1
EPRA earnings 6.1 26.8
Quarterly dividends paid during the year 22 19 (5.9) (25.9)
0.2 0.9
Special dividend paid during the year relating to FY24 (0.3) (1.3)
NAV at 31 March 2025 96.1 423.5
Investment property and PPE valuations increased by £11.9m during the year, of which
£10.4m was delivered in the second half, demonstrating the current upward trajectory and
returning the Company a positive NAV total return per share of 9.5%. A detailed
property valuation commentary is given in the Investment Manager’s report. The movement
in NAV also reflects the payment of interim dividends during the year, but does not
include any provision for the approved dividend of 1.5p per share relating to Q4 which
was paid on Friday 30 May 2025.
Dividends
The Company’s commitment to a property strategy that supports a relatively high
dividend, fully covered by EPRA earnings, remains a defining characteristic and in May
2024 the Board announced a 9% increase in the annual target dividend per share from 5.5p
to 6.0p. This dividend increase reflected the improving earnings characteristics of the
Company’s portfolio through asset management initiatives crystallising rental growth and
the profitable disposal of vacant properties increasing occupancy.
Our Investment Manager continues to keep a tight control on costs, while the Company’s
substantially fixed-rate debt profile is keeping borrowing costs below the current
market rate. Based on the current forward interest rate curve the Board expects that
the ongoing cost of the Company’s revolving credit facility will fall during the next 12
months, tempering the impact of expiry of a £20m fixed-rate loan in August 2025.
The Board’s objective remains to continue to grow the dividend at a rate which is fully
covered by net rental income and does not inhibit the flexibility of the Company’s
investment strategy.
Borrowings
The Company’s net gearing decreased from 29.2% LTV at 31 March 2024 to 27.9% during the
year. Property disposals and the acquisition of Merlin since the year end have reduced
pro-forma net gearing to 25.8%, drawing the LTV closer to the Company’s 25% medium-term
target.
The proportion of the Company’s drawn debt facilities with a fixed rate of interest was
80% at 31 March 2025 (2024: 78%), significantly mitigating interest rate risk for the
Company and maintaining the accretive margin between the Company’s 3.9% (2024: 4.1%)
weighted average cost of debt and property portfolio EPRA topped-up NIY 23 20 of 6.6%
(2024: 6.6%).
The Company’s debt is summarised in Note 16.
Acquisitions
On 30 May 2025 the Company acquired 100% of the ordinary share capital of Merlin
Properties Limited for an initial consideration of 22.9m new ordinary shares in the
Company (“the Transaction”). A second tranche of consideration, expected to comprise c.
1.7m shares, will be payable within the next six months following approval of completion
accounts drawn up to the acquisition date. Aggregate consideration will be calculated
on an ‘adjusted NAV-for-NAV basis’, with each company’s NAV being adjusted for
respective acquisition costs and Merlin’s investment property portfolio valuation
adjusted to the agreed purchase price of £19.4m.
Merlin’s property portfolio is summarised below:
• Investment property portfolio value of £19.4m comprising 28 regional commercial
properties, primarily located in the East Midlands, with sector splits by passing
rent set out below:
Merlin portfolio sector splits
Industrial 47%
Retail warehouse 19%
Office 17%
High street retail 13%
Other 4%
100%
• 10 newly built residential properties largely under offer to sell valued at c. £2.7m
• 74% of passing rent is generated from the 10 largest assets, with Halfords
representing the largest tenant (5% of the £1.7m rent roll)
The Transaction provides us with a portfolio that is both a strong fit with our
income-focused strategy and highly complementary to our existing property portfolio,
augmenting our regional, industrial bias and adding further diversification by tenant.
The Merlin portfolio has a topped-up NIY of 8.1%, ahead of the Company’s equivalent of
6.6%, making it immediately earnings-accretive, and is ungeared so reduces the Company’s
pro-forma net gearing by c. 1%.
Hubert Lynch, Founder Director of Merlin Properties Limited, said: “Operating the Merlin
portfolio, which our family has compiled and managed over the last 40 years, had become
increasingly demanding in today’s complex environment. We have undertaken the
Transaction in a tax efficient manner to ensure our family’s continued exposure to
property investment both currently and for future generations through a professionally
managed fund with a strong track record. As already significant, supportive
shareholders of Custodian Property Income REIT we have a strong relationship with the
Investment Management team which we look forward to continuing for many years.”
Custodian Property Income REIT remains committed to growth and over the first 11 years
of trading the Company has grown, largely organically, but also via corporate
acquisitions, with an over six-fold increase in the size of the portfolio from £90m of
property assets at IPO to a pro-forma c. £610m following the Merlin acquisition and
disposals since the year end. This growth has improved shareholder liquidity and
increased diversification, mitigating property specific and tenant risk while
stabilising earnings.
Following the Merlin acquisition, the Board of Custodian Property Income REIT and the
Investment Manager are actively exploring further opportunities to purchase
complementary portfolios via mergers or corporate acquisitions.
Sustainability
The Company has made further progress in implementing its environmental policy during
the year, improving its weighted average EPC score from C (53) to C (51) following
further refurbishments within the portfolio. The Company’s Asset Management and
Sustainability report is available at:
24 custodianreit.com/environmental-social-and-governance-esg/
This report contains details of the Company’s asset management initiatives with a clear
focus on their impact on ESG, including case studies of recent positive steps taken to
improve the environmental performance of the portfolio.
Cost disclosure exemption
We welcome the Financial Conduct Authority’s exemption of investment companies
(including REITs) from the Packaged Retail and Insurance-based Investment Products
(“PRIIPs”) and Markets in Financial Instruments Directive II (“MiFID II”) regulation.
Since 2018 this regulation has obliged wealth managers and platforms to make cost
disclosures to clients that were ‘fundamentally misleading’ 25 21 by being presented
as being borne by investors despite actually being incurred by the Company and included
within reported investment performance 26 22 .
Exacerbated by more recent Consumer Duty regulations these cost disclosures, which also
result in investment companies’ management costs appearing spuriously more expensive
than alternative structures, are likely to have curtailed investment demand for the
Company’s shares over the last six years.
As the investment industry gradually adjusts to this change, we expect the Company’s
competitive cost structure and high returns to be very attractive to new investors
seeking strong returns from UK real estate.
Investment Manager
The performance of the Investment Manager is reviewed each year by the Management
Engagement Committee. During the year the fees charged by the Investment Manager were
£3.9m (2024: £4.0m) in respect of annual management and administrative transaction fees,
resulting in an ongoing charges ratio excluding direct property expenses of 1.30% (2024:
1.24%), which compares favourably to the peer group. Further details of fees payable to
the Investment Manager are set out in Note 19.
The Board continues to be pleased with the performance of the Investment Manager, noting
particularly the successful acquisition of Merlin, continued positive asset management
initiatives and capital improvements to the Company’s portfolio, with resulting
valuation increases, enhanced environmental performance and maintained occupancy and
income. As a result the Board supports the continued appointment of the Investment
Manager.
On 3 September 2024, 100% of the ordinary share capital of Mattioli Woods, the
Investment Manager’s parent company, was acquired by Tiger Bidco Limited, a wholly-owned
subsidiary of investment vehicles advised and managed by Pollen Street Capital Limited.
The Board is not expecting any operational changes to result from this transaction.
Board
On 6 November 2024 Ian Mattioli MBE DL stepped down from the Board to focus on
capitalising on the market opportunity in UK wealth management in his role as Chief
Executive Officer of Mattioli Woods, following its transition to private ownership. On
behalf of the Board and our shareholders I thank Ian for his invaluable support and
contribution as Founder Director of the Company since IPO in 2014. Ian and his family
are expected to remain major, long-term shareholders in the Company and he will continue
to serve a valuable role for the Company in his capacity as chair of the Investment
Manager and as a member of its Investment Committee.
Also on 6 November 2024 Nathan Imlach, who is currently Chief Strategic Adviser to
Mattioli Woods focusing on acquisitions and contributing to its future direction, was
appointed to the Board for a transition period up until no later than the end of 2025.
Following that transition period the Company’s Board will become fully independent from
the Company’s Investment Manager.
The Board is conscious of the importance stakeholders place on diversity and understands
a diverse Board brings constructive challenge and fresh perspectives to discussions. The
Company follows the AIC Corporate Governance Code and our policy on board diversity is
summarised in the Nominations Committee report. From the start of 2026, the Board
expects to meet the FCA’s target for 40% female Board representation. Custodian
Property Income REIT is an investment company with no Executive Directors and a small
Board compared to equivalent size listed trading companies. The Board welcomes the
gender and ethnic diversity offered by the Investment Management team working with the
Company.
At the Company’s AGM on 8 August 2024 the resolution to re-elect Elizabeth McMeikan as a
Director of the Company (“the Resolution”) received votes against of 24.7% (2023:
23.7%), which comprised 6.8% (2023: 5.8%) of total shareholders. Feedback from
shareholders indicates that votes against the Resolution were primarily a result of
perceived ‘over-boarding’, due to Elizabeth’s roles as Chair of Nichols plc and
Non-Executive Director of Dalata Hotel Group plc and McBride plc. These Directorships
are within the number of ‘mandates’ permitted by Institutional Shareholder Services
(“ISS”), a leading provider of corporate governance and responsible investment solutions
to leading institutional investors, which supported the Resolution. Votes against the
Resolution were primarily from institutional shareholders applying stricter internal
voting policies than ISS by allowing fewer ‘mandates’, and their voting policies do not
acknowledge the generally lower time commitments as Directors of investment companies or
companies of a relatively small size.
I believe additional roles offer Directors helpful insight and experience which benefits
the Boards on which they sit and I do not intend to ask any fellow Directors to reduce
their additional roles. Along with all of the Directors, Elizabeth is a diligent and
important member of the Board and I am grateful to all of them for their contributions
and support.
Outlook
The Board appreciates the support of its wide range of shareholders with the majority
classified as private client or discretionary wealth management investors. Custodian
Property Income REIT’s investment and dividend strategy, and diversified portfolio are
well suited to investors looking for a close proxy to direct real estate investment but
in a managed and liquid structure.
The Board believes strongly in the benefits of diversification in mitigating property
and sector specific risk, while delivering dividends that are fully covered by recurring
earnings and generally higher than sector specialists. The Board also remains firm in
its belief that this strategy is well suited to long-term investors in real estate,
allowing for the timely execution of acquisitions and disposals without the constraints
of sector specificity, while setting the Company apart from the single sector, often
higher risk funds.
The Company’s Investment Manager has curated a portfolio that focuses on long-term
income and income growth, through careful stock selection and a balance between the main
commercial property sectors, weighted to those that should offer the greatest rental
growth potential. This portfolio has supported growing earnings, fully covered by
growing dividends, with 101.3% dividend cover for the year (2024: 100.7%). Income and
income growth are likely to form the greater component of total return over the next
phase of the property cycle if long-term interest rates continue to stay high with
persistent inflation.
However, as short-term interest rates fall and investors re-connect with real estate
investment for its attractive income credentials, Custodian Property Income REIT’s share
price is well-placed to re-rate and trend back towards NAV, enhancing the total return
for all of our shareholders. In addition, with asset prices showing signs of recovery
and the recent announcement of the Merlin portfolio acquisition, the Board looks to the
future with cautious confidence.
David MacLellan
Chairman
11 June 2025
Investment Manager’s report
The UK property market
At a property market level, it is encouraging that the evidence is once again supportive
of a recovery in the fortunes of UK commercial real estate. Transaction volumes have
been increasing, albeit there has been a slight hiatus as the world reacts to US trade
policy. Of note is the increased investment in the office sector, with a focus on grade
A city centre buildings. The industrial and logistics sector continues to be popular
and there is renewed focus on out-of-town retail/retail warehousing. Since the middle
of last year, we have seen a further stabilisation of valuations as well as some
increases during recent quarters, driven mainly by rental growth but also through
emerging yield compression.
The consistent thread in the story of UK commercial real estate is positive occupier
activity, with declining vacancy rates in prime locations and increased leasing
activity, particularly in the office sector, as companies finalise their
return-to-office strategies. While there is evidence of developments restarting and new
planning applications increasing, the lack of development over the last two/three years
is maintaining pressure on supply and supporting rental growth.
Post year-end, Custodian Property Income REIT’s share price experienced volatility in
line with the wider stock market, but perhaps this reaction will settle into a more
considered position for real estate. It would not be unreasonable to expect that during
periods of trade uncertainty, UK real estate can be seen as a safe haven, as investors
seek stable income, with asset backing in established and secure jurisdictions. This
should be particularly true for the Company’s investment strategy that generally targets
sub £10m, regional, UK assets, that principally serve a local and/or domestic market.
The fully covered dividend per share for the year of 6.0p offered a dividend yield of
7.9% at the year end (2024: 5.8p dividend, 7.2% yield), as weak economic confidence
pushed the share price to a discount to NAV of c.19%. While we believe this
fundamentally undervalues the security and quality of income offered through our fully
covered dividend, and despite the fact that we continually demonstrate our ability to
realise sales at premiums to book value, the discount remains less than the UK listed
real estate market average discount of c. 28%. This suggests that while investors value
the income, they also still overplay the risk in UK real estate which should be set
against a backdrop of falling interest rates, rising property prices, growing rents and
falling vacancy rates which are normally associated with a reduction in risk.
No commentary on UK listed real estate would be complete without considering the
corporate activity that has swept through the sector. Comprising mergers, acquisitions,
wind downs, strategic reviews and take-privates, the common theme is that private equity
is seeing value in the sector. Against the average market discount to NAV of c.28%,
most corporate activity is pricing transactions at between a 0% and 12% discount to NAV,
which highlights the disparity in perceptions of value.
As these perceptions of value merge, we should expect to see a recovery in ratings
across the sector, which adds further support to our view that the sector is currently
under-valued.
On a sectoral basis there has been positive news for all the main commercial property
sectors. Industrial and logistics continue to lead the way on rental growth, but we
have also recorded rental growth in retail warehousing, offices and high street retail.
The table below shows the reversionary potential of the portfolio by sector, by
comparing EPRA topped-up NIY to the equivalent yield, which factors in expected rental
growth and the letting of vacant units. Across the whole portfolio, valuers’ ERV are
14% (2024: 15%) ahead of passing rent and while part of the reversionary potential is
due to vacancy, the balance is this latent rental growth which will be unlocked at rent
review and lease renewal.
EPRA topped-up EPRA topped-up Equivalent
NIY Equivalent NIY yield
yield 27 23
31 March 2025 31 March 2024 31 March 2024
31 March 2025
Sector
Industrial 5.5% 6.9% 5.4% 6.7%
Retail warehouse 7.5% 7.6% 8.0% 7.4%
Other 7.7% 8.4% 7.1% 8.0%
Office 8.1% 11.1% 7.1% 9.8%
High street 9.4% 8.4% 9.9% 8.1%
retail
6.6% 7.8% 6.6% 7.5%
Prevailing property investment approach
Based on our assessment of the current market, our strategy to maintain a regionally
focused diversified portfolio, as set out below, has proven resilient. We expect to
reinvest the proceeds from selective disposals in funding capital expenditure to improve
the environmental credentials of the portfolio and to pay down variable rate debt. Over
the long-term we intend to focus on:
• Maintaining weighting to industrial and logistics – assets in this sector still have
latent rental growth and strong occupier demand for small/’mid-box’ units;
• Retail warehousing let off low rents which are starting to show rental growth and
supply side restrictions;
• Selective regional offices with a focus on strong city centre locations instead of
out-of-town business parks;
• Drive-through expansion involving acquisition and development where rental growth is
anticipated;
• Selective high street retail assets in the country’s strongest locations where rents
have stabilised and there is potential for growth; and
• Refurbishment of existing property, maximising all opportunities to invest in the
quality of our assets and support our ESG goals.
Sectoral view
Industrial and logistics
Rental growth remains strongest in the industrial and logistics sector which accounts
for the largest share of the Company’s rent roll. Lack of supply, and in some urban
areas reducing supply, limited development of smaller and ‘mid-box’ industrial units and
construction cost inflation have all combined to focus occupational demand and create
low vacancy rates, driving rental growth for new-build regional industrial units and
well specified, refurbished space. The industrial sector is also providing the greatest
opportunity for solar panels, generally referred to as photovoltaic (“PV”)
installations, which is not only delivering on our environmental commitments but also
growing revenue through the sale of the electricity generated to tenants via a power
purchase agreement. In the three months to 31 March 2025 the Company recorded income of
£0.1m from 10 PV installations currently operational at industrial sites. 12 new
installations are currently under consideration.
In summary:
• Occupational demand is robust
• Limited supply of modern, ‘low carbon’, buildings
• Latent rental growth potential
• Target sector for well-priced opportunities
Retail warehouse
Retail warehousing is the sector which the Investment Property Forum Consensus Forecast
expects to record the highest total return, showing some rental growth but with strong
capital performance. Our preferred sub-sectors are food, homewares, DIY and the
discounters. Vacancy rates are very low and future rental growth appears affordable for
occupiers.
The combination of convenience, lower costs per square foot and the complementary offer
to online retail has kept these assets trading strongly. As the second largest sector
in the Custodian Property Income REIT portfolio, the recovery in market sentiment
towards out-of-town retail is positive and vacancy rates remain low.
In summary:
• Units let off low rents
• Lower costs of occupation
• Complementary to online
Offices
In the office sector, we have pursued a strategy of reducing exposure to business park
assets, where we believe tenant demand is weaker and rental growth prospects are much
more limited. While only a small percentage of the portfolio, where we have retained
offices, they have been city centre buildings that can be or have been brought up to
modern occupier requirements and have low environmental impact standards.
In summary:
• Occupier demand is stronger in city centre locations
• Strong rental growth in select locations
• Valuations have stabilised
High street retail
We continue to see low vacancy rates in prime locations and occupier demand, from both
retail and leisure operators, should be supportive of future rental growth.
In summary:
• Low vacancy rates in prime locations
• Rents are starting to show growth
• Rental yields support dividends
Other
Weighting Weighting
by income by income
31 March 2025 31 March 2024
Sub-sector of ‘Other’ sector assets
Gym 20% 18%
Drive-through 17% 17%
Motor trade 16% 17%
Pub and restaurant 15% 15%
Other, including day nursery and hotel 13% 13%
Leisure 12% 13%
Trade counter 7% 7%
100% 100%
Property portfolio balance
Property portfolio summary
2025 2024
Property portfolio value 28 24 £594.4m £589.1m
Separate tenancies 349 335
EPRA vacancy rate 8.9% 8.3%
Assets 151 155
Weighted average unexpired lease term to first break of expiry 5.0 years 4.9 years
(“WAULT”)
EPRA topped-up NIY 6.6% 6.6%
Weighted average EPC rating C (51) C (53)
The property portfolio is split between the main commercial property sectors in line
with the Company’s objective to maintain a suitably balanced investment portfolio. The
Company’s strategy since IPO has been a relatively low exposure to office and high
street retail combined with a relatively high weighting to the industrial and
alternative sectors, often referred to as ‘other’ in property market analysis.
The current sector weightings are:
Valuation Weighting by Valuation Weighting
income 29 25 by income Valuation
31 March 31 March movement
2025 31 March 2024 31 March Weighting
£m Weighting by value
£m 2025 £m 2024 by value 31 31 March
March 2025 2024
Sector
Industrial 298.3 42% 291.4 40% 11.6 50% 49%
Retail 127.3 22% 122.7 23% 4.4 21% 21%
warehouse
Other 78.2 13% 78.8 13% 0.5 13% 13%
Office 57.7 16% 63.9 16% (5.7) 10% 11%
High street 32.9 7% 32.3 8% 0.4 6% 6%
retail
Total 594.4 100% 589.1 100% 11.2 100% 100%
For details of all properties in the portfolio please see
30 custodianreit.com/property/portfolio.
Disposals
Owning the right properties at the right time is a key element of effective property
portfolio management, which necessarily involves periodically selling properties to
balance the property portfolio. Custodian Property Income REIT is not a trading company
but identifying opportunities to dispose of assets significantly ahead of valuation or
that no longer fit within the Company’s investment strategy is important.
The Company sold the following properties during the year for an aggregate £15.1m, 5%
ahead of the most recent valuation and 38% ahead of their pre-offer valuation:
• A vacant industrial unit in Warrington for £9.0m to a developer;
• A vacant former car showroom in Redhill for £2.35m to a developer;
• Vacant offices in Castle Donington for £1.75m to a flexible office provider;
• Vacant offices in Solihull for £1.4m to an owner-occupier; and
• One unit of a two-unit industrial asset in Sheffield to an owner-occupier for
£0.55m.
Since the year end the Company has sold:
• Part-let offices in Cheadle for £4.0m; and
• Fully-let offices in Cheadle for £2.9m.
Asset management
During the year we have remained focused on active asset management, completing 15 rent
reviews at an aggregate 29% increase in annual rent from £2.5m to £3.2m, along with 64
new lettings, lease renewals and lease regears, with rental levels remaining affordable
to our occupiers.
During the year we deployed £8.2m on property refurbishments including £1.3m installing
solar panels. £2.6m of this capital expenditure related to the pre-let extension of an
industrial building in Livingston, allowing the occupier to expand and achieve its plans
for growth. The extension achieved practical completion in May 2025, increasing annual
rent by c.£0.2m.
ESG
The sustainability credentials of both the building and the location have become ever
more important for occupiers and investors. As Investment Manager we are absolutely
committed to achieving the Company’s challenging goals in relation to ESG and believe
the real estate sector should be a leader in this field.
The weighted average EPC across the portfolio is following a positive trajectory towards
an average B rating (equivalent to a score of between 25 and 50). With energy
efficiency a core tenet of the Company’s asset management strategy and with tenant
requirements aligning with our energy efficiency goals we see this as an opportunity to
secure greater tenant engagement and higher rents.
During the year the Company has updated EPCs at 35 units across 24 properties where
existing EPCs had expired or where works had been completed, improving the weighted
average EPC rating from C (53) at 31 March 2024 to C (51).
Richard Shepherd-Cross
Managing Director
for and on behalf of Custodian Capital Limited
Investment Manager
11 June 2025
Financial review
A summary of the Company’s financial performance for the year is shown below:
Year ended Year ended
Financial summary 31 March 2025 31 March 2024
£000
£000
Rental revenue 42,828 42,194
Other income 476 195
Expenses and net tenant recharges (9,159) (8,599)
Net finance costs (7,359) (8,048)
EPRA profits 26,786 25,742
Abortive acquisition costs - (1,557)
Net gain/(loss) on investment property and depreciation 11,369 (25,687)
Profit/(loss) before tax 38,155 (1,502)
EPRA EPS (p) 6.1 5.8
Dividend cover 101.3% 100.7%
OCR excluding direct property costs 1.30% 1.24%
Borrowings
Net gearing 27.9% 29.2%
Weighted average debt maturity 4.5 years 5.3 years
Weighted average cost of drawn debt 3.9% 4.1%
Revenue
Rental revenue increased by 1.5% compared to the year ended 31 March 2024 with year-end
contractual passing rent increasing by 1.9% from £43.1m to £43.9m during the year (a
2.3% like-for-like increase). The £0.4m impact on year-end passing rent from an overall
0.6% decrease in occupancy was more than offset by annual rental growth of £1.2m, of
which £1.1m was from the industrial sector.
During the year we deployed £1.3m on PV installations at nine assets (2024: £2.1m) and
associated ‘other’ revenues have increased by 144% as a result. We expect PV revenues
to continue to grow as recent installations go live and we continue to roll-out PV via
our pipeline of anticipated refurbishments.
Finance costs
During the year we deployed £8.2m (2024: £19.0m) of variable rate debt on property
refurbishments and installing solar panels. This capital expenditure was funded by
£15.1m of disposal proceeds with the balance used to pay down the Company’s variable
rate revolving credit facility (“RCF”) facility. With a net decrease in the drawn RCF
balance and base rate (SONIA) decreasing from c.5.2% to c.4.5% during the year, net
finance costs decreased by £0.7m.
Earnings
These positive movements in rent and finance costs increased EPRA earnings per share to
6.1p (2024: 5.8p). This increase in recurring earnings demonstrates the robust nature
of the Company’s diverse property portfolio.
During the year sentiment towards real estate improved despite concerns over high
long-term gilt rates and the outlook for medium-term earnings. Like-for-like valuation
increases were 2.2% following two years of previous decreases and over the year these
outlook improvements resulted in an £11.2m valuation increase (2024: £27.0m decrease)
and an associated profit before tax of £38.2m (2024: £1.5m loss).
Dividends
The Board acknowledges the importance of income for shareholders and during the year its
policy was to pay dividends at a rate fully covered by net rental income which does not
inhibit the flexibility of the Company’s investment strategy.
The Company paid dividends totalling 6.175p per share during the year (£27.2m)
comprising a fourth interim dividend relating to the year ended 31 March 2024 of 1.375p,
a special dividend relating to FY24 of 0.3p, and three quarterly interim dividends of
1.5p per share relating to the year ended 31 March 2025.
On Friday 30 May 2025 the Company paid a fourth quarterly interim dividend per share of
1.5p for the quarter ended 31 March 2025 of £6.6m. Dividends relating to the year ended
31 March 2025 of 6.0p (2024: 5.8p) were 101.3% (2024: 100.7%) covered by EPRA earnings
of £26.8m (2024: £25.7m), as calculated in Note 22.
Debt financing
The Company operates with a conservative level of net gearing, with target borrowings
over the medium-term of 25% of the aggregate market value of all properties at the time
of drawdown. The Company’s net gearing decreased from 29.2% LTV last year to 27.9% at
the year-end primarily due to £11.9m of valuation increases and a net £6.9m receipt from
disposals and capital deployment.
On 23 January 2025 the Company and Lloyds Bank plc (“Lloyds”) agreed to extend the term
of the RCF by one year to expire on 10 November 2027. An option remains in place to
extend the term by a further year to 2028, subject to Lloyds’ consent. The RCF includes
an ‘accordion’ option, with the facility limit increased from £50m to £60m since the
year end, which can be increased up to £75m subject to Lloyds’ agreement.
At the year end the Company had the following facilities available:
• A £50m RCF with Lloyds with interest of between 1.62% and 1.92% above SONIA,
determined by reference to the prevailing LTV ratio of a discrete security pool of
assets, and expiring on 10 November 2027 (with an extension option to 2028). The
facility limit can be increased to £75m with Lloyds’ approval;
• A £20m term loan facility with Scottish Widows Limited (“SWIP”) repayable in August
2025, with fixed annual interest of 3.935%;
• A £45m term loan facility with SWIP repayable in June 2028, with fixed annual
interest of 2.987%; and
• A £75m term loan facility with Aviva Real Estate Investors (“Aviva”) comprising:
• A £35m tranche repayable on 6 April 2032, with fixed annual interest of 3.02%;
• A £15m tranche repayable on 3 November 2032 with fixed annual interest of 3.26%; and
• A £25m tranche repayable on 3 November 2032 with fixed annual interest of 4.10%.
Each facility has a discrete security pool, comprising a number of the Company’s
individual properties, over which the relevant lender has security and the following
covenants:
• The maximum LTV of each discrete security pool is either 45% or 50%, with an
overarching covenant on the Company’s property portfolio of a maximum of either 35%
or 40% LTV; and
• Historical interest cover, requiring net rental income from each discrete security
pool, over the preceding three months, to exceed either 200% or 250% of the
facility’s quarterly interest liability.
At the year end the Company had £103.5m (17% of the property portfolio) of unencumbered
assets which could be charged to the security pools to enhance the LTV on the individual
loans. A £1.9m unencumbered industrial asset in Dundee is in the process of being
charged to the Aviva loan pool.
The weighted average cost of the Company’s drawn debt facilities at 31 March 2025 was
3.9% (2024: 4.1%), with a weighted average maturity of 4.5 years (2024: 5.3 years). At
31 March 2025 the Company had £35.0m (2024: £39.0m) drawn under its Lloyds RCF, meaning
80% (2024: 78%) of the Company’s drawn debt facilities were at fixed rates of interest.
This high proportion of fixed rate debt significantly mitigates long-term interest rate
risk for the Company and provides shareholders with a beneficial margin between the
fixed cost of debt and income returns from the property portfolio.
The Board intends to utilise the Company’s variable rate RCF to repay the £20m fixed
rate loan with SWIP due to expire in August 2025 and since the year end has increased
the RCF facility limit from £50m to £60m to provide headroom. The Board intends to
consider longer-term options once financial markets are more stable.
Key performance indicators
The Board reviews the Company’s quarterly performance against a number of key financial
and non-financial measures:
• EPS and EPRA EPS – reflect the Company’s ability to generate recurring earnings from
the property portfolio which underpin dividends;
• Dividends per share and dividend cover - to provide an attractive level of income to
shareholders, fully covered from net rental income. The Board reviews target
dividends in conjunction with detailed financial forecasts to ensure that target
dividends are being met and are maintainable;
• Target dividend per share – an expectation of the Company’s ability to deliver an
income stream to shareholders for the forthcoming year;
• NAV per share total return – reflects both the NAV growth of the Company and
dividends payable to shareholders. The Board assesses NAV per share total return
over various time periods and compares the Company's returns to those of its peer
group of listed, closed-ended property investment funds;
• Share price total return – reflects the movement in share price and dividends
payable to shareholders, giving returns that were available to shareholders during
the year;
• NAV/NTA per share, share price and market capitalisation – reflect various measures
of shareholder value at a point in time;
• Net gearing – measures the Company’s borrowings as a proportion of its investment
property, balancing the additional returns available from utilising debt with the
need to effectively manage risk;
• Weighted average cost of debt – measures the cost of the Company’s borrowings based
on amounts drawn and base rate at the year end;
• OCR – measures the annual running costs of the Company and indicates the Board’s
ability to operate the Company efficiently, keeping costs low to maximise earnings
from which to pay fully covered dividends; and
• Weighted average EPC rating – measures the overall environmental performance of the
Company’s property portfolio.
The Board considers the key performance measures over various time periods and against
similar funds. A record of these measures is disclosed in the Financial highlights and
performance summary, the Chairman's statement and the Investment Manager's report.
EPRA performance measures
EPRA Best Practice Recommendations, which are APMs, have been disclosed to facilitate
comparison with the Company’s peers through consistent reporting of key real estate
specific performance measures.
2025 2024
EPRA EPS (p) 6.1 5.8
EPRA Net Tangible Assets (“NTA”) and Net Reinstatement Value (“NRV”) per 96.1 93.4
share (p)
EPRA Net Disposal Value (“NDV”) per share (p) 99.9 97.3
EPRA NIY 6.2% 6.3%
EPRA ‘topped-up’ NIY 6.6% 6.6%
EPRA vacancy rate 8.9% 8.3%
EPRA cost ratio (including direct vacancy costs) 24.0% 22.0%
EPRA cost ratio (excluding direct vacancy costs) 19.7% 17.7%
EPRA LTV 28.7% 29.6%
EPRA capital expenditure (£m) 6.8 17.0
EPRA like-for-like annual rent (£m) 42.3 41.0
• EPRA EPS – a key measure of the Company’s underlying operating results and an
indication of the extent to which current dividend payments are supported by
earnings
• EPRA NAV per share metrics – make adjustments to the NAV per the IFRS financial
statements to provide stakeholders with information on the fair value of the assets
and liabilities of a real estate investment company, under different scenarios.
EPRA NTA - assumes that entities buy and sell assets, thereby crystallising certain
levels of unavoidable deferred tax. EPRA NDV – includes an adjustment for the fair
value of fixed rate debt.
• EPRA NIY and ‘topped-up’ NIY – alternative measures of property portfolio valuation
based on cash passing rents at the reporting date and once lease incentive periods
have expired, net of vacant property operating costs
• EPRA vacancy rate – expected rental value (“ERV”) of vacant space as a percentage of
the ERV of the whole property portfolio and offers insight into the additional rent
generating capacity of the portfolio.
• EPRA cost ratios – alternative measures of ongoing charges based on expenses,
excluding operating expenses of rental property recharged to tenants, but including
increases in the doubtful debt provision, compared to gross rental income
• EPRA LTV – a measure of gearing including all payables and receivables
• EPRA capital expenditure - capital expenditure incurred on the Company’s property
portfolio during the year
• EPRA like-for-like rental growth - a measure of passing rent of the property
portfolio, excluding acquisitions and disposals
• EPRA Sustainability Best Practice Recommendations – environmental performance
measures focusing on emissions and resource consumption which create transparency to
potential investors by enabling a comparison against peers and set a direction
towards improving the integration of ESG into the management of the Company’s
property portfolio.
Outlook
The Company’s business model has remained resilient during the year and we have further
mitigated against refinancing risk by renewing the Company’s RCF. We have a scalable
cost structure and flexible capital structure to be on the front foot when opportunities
present themselves to raise new equity and exploit acquisition opportunities.
Ed Moore
Finance Director
for and on behalf of Custodian Capital Limited
Investment Manager
11 June 2025
Principal risks and uncertainties
The Board has overall responsibility for reviewing the effectiveness of the system of
risk management and internal control which is operated by the Investment Manager.
During the year the Board has performed a robust assessment of the principal and
emerging risks facing the Company through a periodic review of, and updates to, its risk
register. The Company’s risk management process is designed to identify, evaluate and
mitigate the significant risks the Company faces in line with its risk appetite. At
least annually, the Board undertakes a risk review, with the assistance of the Audit and
Risk Committee, to assess the effectiveness of the Investment Manager’s risk management
and internal control systems. During this review, no significant failings or weaknesses
were identified in respect of risk management, internal control and related financial
and business reporting. Further information on the risk governance and risk management
processes are included in the Internal control and risk management section of the
Governance report.
The Company holds a portfolio of high quality property let predominantly to
institutional grade tenants and is primarily financed by fixed rate debt. It does not
undertake speculative development.
There are a number of potential risks and uncertainties which could have a material
impact on the Company's performance over the forthcoming financial year and could cause
actual results to differ materially from expected and historical results. The Directors
have assessed the risks facing the Company, including risks that would threaten the
business model, future performance, solvency or liquidity. The table below outlines the
principal risks identified, but does not purport to be exhaustive as there may be
additional risks that materialise over time that the Company has not yet identified or
has deemed not likely to have a potentially material adverse effect on the business.
Overall
Risk on business Likelihood and change in Mitigating factors Appetite
and causes impact risk from
last year
• Diverse property
portfolio
Loss of revenue covering all key
sectors and
• An increasing geographical
number of areas
tenants • The Company has
exercising over 300
contractual individual
breaks or not tenancies with
renewing at the largest
lease expiry tenant
• Unable to accounting for
re-let void 3.9% of the rent
units promptly roll
• Tenant default • Investment
due to a policy limits
cessation or the Company’s
curtailment of rent roll to no
trade Likelihood: more than 10% The Board
• Enforced Moderate from a single relies on the
reduction in tenant and 50% Investment
contractual from a single Manager’s
rents through sector processes
CVAs Impact: High • Primarily regarding due
• Property No change institutional diligence on
environmental grade tenants lettings. A
performance • Focused on degree of
insufficient to Loss of revenue has established tenant
attract tenants an immediate impact Discussed business covenant risk
or maintain on earnings and further in locations for and short
rents dividend capacity. the investment WAULTs are
• More frequent There is also an Investment • Active accepted due
and longer increased risk of Manager’s management of to the nature
periods of breaching interest report lease expiry of the
property cover covenants on profile business
refurbishment borrowings, considered in
delaying detailed in Note forming
re-letting 16, which could acquisition and
• Decreases in ultimately lead to disposal
rental rates default. decisions
due to general • Building
economic specifications
conditions or typically not
sector/property tailored to one
specific user
factors • Strong tenant
• Expiries or relationships
breaks • Significant
concentrated in focus and
a specific year proactive
• Low UK economic investment in
growth asset-by-asset
impacting the environmental
occupational performance to
property market maintain or
improve rental
levels
Decreases in • Occupational
property portfolio demand has been
valuation resilient during
the year despite
• Reduced Likelihood: Low economic
property market headwinds
sentiment and • Active property
investor demand portfolio
affecting Impact: Moderate diversification
market pricing between office,
• Decreases in industrial
sector-specific (distribution,
ERVs Valuation decreases Decreased manufacturing There is no
• Change in increase the risks –valuations and certainty that
demand for of: have warehousing),
space stabilised retail property
• Property during the warehousing, values will be
environmental year due to high street realised.
performance • Non-compliance decreasing retail and other
insufficient to with LTV interest • Investment This is an
attract tenants covenants on rates and policy limits inherent risk
• Property borrowings, continued the Company’s of property
obsolescence detailed in robust property investment.
requiring Note 16, which occupational portfolio to no
increasing could demand more than 50% in The Investment
levels of ultimately lead any specific Manager aims
capital to default; and sector or to minimise
expenditure to • The Company geographical this risk
maintain rental realising its Discussed region through its
tone investments at further in • Smaller lot-size asset
• Refurbishment lower values. the business model selection
or repair work Chairman’s limits exposure
cost over-runs statement to individual and active
not reflected and asset values asset
in valuations The Company’s Investment • High quality management
• Properties sensitivity to Manager’s assets in good initiatives.
concentrated in valuation decreases report locations should
a specific is considered remain popular
geographical further in Going with investors
location or concern and • Significant
sector longer-term focus on
• Lack of viability below asset-by-asset
transactional ESG performance
evidence and proactively
• Decreases in investing in
occupancy environmental
performance to
maintain or
improve demand
• The Company has
three lenders
• The Company’s
weighted average
maturity on its
debt is c. five
Likelihood: Low years
• Target net
gearing of 25%
Reduced LTV on property
availability or Impact: High portfolio The Board and
increased cost of • 80% of drawn Investment
debt financing debt facilities Manager focus
at the year end
• Breach of Increases in Decreased – at a fixed rate on having
financial and interest rates in valuations of interest funding in
non-financial the short-term have • Significant place to take
borrowing reduce earnings and stabilised unencumbered advantage of
covenants dividend capacity during the properties opportunities
• Over-reliance to the extent the year and are available to as they arise.
on an Company has drawn starting to cure any
individual balances on its increase, potential The Board’s
lender variable rate RCF. with breaches of LTV aim is to
• Significant Lack of variable covenants minimise this
increases in availability of interest • Ongoing risk to the
interest rates financing would rates monitoring and extent
• LTV increasing have a significant decreasing management of possible
above target impact on property the forecast through
• Refinancing strategy if liquidity and arranging
risk from properties needed covenant longer-term
upcoming to be sold to repay position facilities.
expiries loans. • RCF limit
increased from
£50m to £60m
since the year
end to provide
RCF headroom
ahead of
repaying the
£20m SWIP loan
expiring in
August 2025
• Ongoing review
of key service
provider
performance by
the Management
Engagement
Committee
• Outsourced
internal audit
function
Likelihood: reporting
Moderate directly to the
Inadequate Audit and Risk
operational Committee
performance • External
Impact: High depositary with
• Inadequate responsibility
performance, Increased – for safeguarding The Board
controls or a member of assets and relies on the
systems Increased risk of key performing cash Investment
operated by the sub-optimal returns Investment monitoring Manager’s
Investment impacting earnings Manager • The Investment processes. Its
Manager and dividend personnel Management appetite for
• Over-reliance capacity, left during Agreement such
on key ineffective risk or the year contains key
investment threat management personnel risk is low
manager or decisions made provisions
personnel or on inaccurate designed to
other third information. mitigate the
party service potential impact
providers Inability to retain of key
or recruit staff of individuals
an appropriate leaving
calibre • A satisfactory
appointment has
been made by the
Investment
Manager to
replace its key
member of
personnel who
left during the
year
• Strong
compliance
culture, with an
independent
Management
Regulatory, legal Engagement
and governance Likelihood: Low Committee
overseeing the
• Adverse impact Investment
of new or Manager
revised Impact: High relationship
legislation or • External
regulations, or professional
by changes in advisers are
the • Reputational engaged to
interpretation damage could review and
or enforcement impact demand advise upon
of existing for shares. control
government • Earnings and environment,
policy, laws dividend ensure
and regulations capacity would regulatory The Board has
• Non-compliance decrease with compliance and no appetite
with the REIT penalties/fines advise on the for
regime 31 26 for impact of non-compliance
or changes to non-compliance No change changes
the Company’s or through an • Business model
tax status increased tax and culture
• Properties charge embraces FCA
aren’t • Remedial costs principles
compliant with or claims for • REIT regime
prevailing fire non-compliance compliance is
safety could be considered by
legislation substantial the Board in
• Conflicts of assessing the
interest with • Conflicts of Company’s
the Investment interest could financial
Manager lead to position and
• Non-compliance operational setting
with the issues or dividends and by
Company’s reputational the Investment
Articles of damage Manager in
Association making
operational
decisions
• Fire safety
policy goes over
and above
minimum
requirements
• Data is
regularly backed
up and
replicated and
the Investment
Manager’s IT
systems are
protected by
Business anti-virus
interruption Likelihood: software and
Moderate firewalls that
• Cyber-attack are regularly
results in the updated
Investment • Fire protection
Manager being Impact: High and
unable to use access/security The Board
its IT systems procedures are relies on the
and/or losing in place at all Investment
data Reputational damage of the Company’s Manager’s
• Terrorism or from not being able No change managed processes. It
pandemics to communicate with properties has no
interrupt the shareholders on a • Comprehensive appetite for
Company’s timely and accurate property damage such risk
operations basis. Loss of and business
through impact earnings and interruption
on either the dividend capacity insurance is
Investment if contractual held, including
Manager or the rents not invoiced. three years’
Company’s Fines and penalties lost rent and
assets or from non-compliance terrorism
tenants with reporting • At least
requirements. annually, a fire
risk assessment
and health and
safety
inspection is
performed for
each property in
the Company’s
managed
portfolio
• The Company has
engaged
specialist
environmental
consultants to
advise the Board
on compliance
with
Environmental requirements and
adopting best
• Failure to practice where
appropriately possible
manage the • The Company has
environmental a published ESG
performance of policy which
the property seeks to improve
portfolio, energy
resulting in it efficiency and
not meeting the reduce emissions
required • The ESG
standards of Committee
environmental ensures
legislation and compliance with
making Likelihood: environmental
properties Moderate requirements,
unlettable or the ESG policy
unsellable and
• ESG policies environmental
and targets Impact: Moderate KPIs The Board is
being • At a property averse to
insufficient to No change level an non-compliance
meet the environmental risk, in
required Risk of assessment is particular
standards of reputational undertaken which when it may
stakeholders damage, suboptimal Discussed influences adversely
• Non-compliance returns for further in decisions impact
with shareholders, the ESG regarding reputation,
environmental decreased asset Committee acquisitions, stakeholder
reporting liquidity, reduced report refurbishments sentiment or
requirements access to debt and and asset asset
• Insufficient capital markets and management liquidity.
electricity poor relationships initiatives
supply to with stakeholders • Upgrading power
maintain tenant supplies where
requirements availability
for clean permits
energy due to • All investments
inadequate are scrutinised
infrastructure by the
• Unsuccessful Investment
investment in Manager’s
new technology Investment
• Physical risk Committee.
to properties Investment
due to Committee
environmental reports include
factors and a dedicated ESG
extreme weather rationale.
Carbon reducing
technology is a
key part of the
carbon-reduction
strategy but is
not invested in
speculatively
and only
established
products are
considered.
• Comprehensive
due diligence is
Acquisition due undertaken in
diligence conjunction with
professional
• Unidentified Likelihood: Low advisers and the
risk and provision of The Board
liabilities insured accepts risk
associated with warranties and with such
the acquisition Impact: Moderate No change indemnities are transactions
of new sought from with the
properties vendors where mitigations
(whether appropriate opposite used
acquired Decrease in • Acquired to manage risk
directly or via profitability or companies’ trade where possible
a corporate NAV and loss of and assets are
structure) shareholder value hived-up into
Custodian
Property Income
REIT plc and the
acquired
entities are
subsequently
liquidated
Emerging risks
The following risks have been added to the Company’s risk register during the year:
• Increases in yields of long-term fixed-rate government bonds impacting demand for
the Company’s shares; and
• Shareholder activists in the Investment Company sector not acting in the best
interests of all shareholders.
The Company’s share price has been materially impacted by increases in gilt yields
during the year, and since the year end by the escalating global impact of US trade
policy. The Board accepts inherent risk associated with operating a closed-ended
investment structure. The Investment Manager and the Company’s broker and Distribution
Agent maintain strong lines of communication with shareholders
The impact of geo-political risk relating to the ongoing conflicts in Ukraine and Gaza,
tensions between the USA and its trading partners and its volatile political climate,
and UK specific factors including apparent declining health of public markets and a
‘cost of living crisis’ also add to uncertainty over the prevailing macroeconomic
outlook. However, these factors are not considered direct emerging risks because of the
Company’s diverse property portfolio covering all sectors and geographical areas in the
UK with over 300 individual tenancies.
Going concern and longer-term viability
The Board assesses the Company’s prospects over the long-term, taking into account
rental growth expectations, climate related risks, longer-term debt strategy,
expectations around capital investment in the portfolio and the UK’s long-term economic
outlook. At quarterly Board meetings, the Board reviews summaries of the Company’s
liquidity position and compliance with loan covenants, as well as forecast financial
performance and cash flows.
Forecast
The Investment Manager maintains a detailed forecast model projecting the financial
performance of the Company over a period of three years, which provides a reasonable
level of accuracy regarding projected lease renewals, asset-by-asset capital
expenditure, property acquisitions and disposals, rental growth, interest rate changes,
cost inflation and refinancing of the Company’s debt facilities ahead of expiry. The
detailed forecast model allows robust sensitivity analysis to be conducted and over the
three year forecast period included the following assumptions:
• 1% annual loss of contractual revenue through CVA or tenant default;
• 70% tenant retention rate at lease break or expiry with vacated assets followed by
an appropriate period of void;
• Rental growth, captured at the earlier of rent review or lease expiry, based on
current ERVs adjusted for consensus forecast changes;
• Portfolio valuation movements based on consensus forecast changes;
• Completing a programme of asset disposals;
• The Company’s capital expenditure programme to invest in its existing assets
continues as expected;
• The £20m SWIP loan is repaid using the RCF on its expiry in August 2025; and
• Interest rates follow the prevailing forward curve.
The Directors have assessed the Company’s prospects and longer-term viability over this
three-year period in accordance with Provision 36 of the AIC Code, and the Company’s
prospects as a going concern over a period of 12 months from the date of approval of the
Annual Report, using the same forecast model and assessing the risks against each of
these assumptions.
The Directors note that the Company has performed strongly during the year despite
economic headwinds with like-for-like rents increasing over the last 12 months.
Sensitivities
Sensitivity analysis involves flexing the assumptions listed above, taking into account
the principal risks and uncertainties and emerging risks detailed in the Strategic
Report. This analysis includes stress testing the point at which covenants would breach
through rent losses and property valuation movements, and assessing their impact on the
following areas:
Covenant compliance
The Company operates the loan facilities summarised in Note 16. At 31 March 2025 the
Company had sufficient headroom on lender covenants at a portfolio level with:
• Net gearing of 27.9% compared to a maximum LTV covenant of 35% on its Aviva
facilities and 40% on its Lloyds and SWIP facilities, with £103.5m (17% of the
property portfolio) unencumbered by the Company’s borrowings; and
• 117% minimum headroom on interest cover covenants for the quarter ended 31 March
2025.
Over the one and three year assessment periods the Company’s forecast model projects a
small increase in net gearing and an increase in headroom on interest cover covenants.
Reverse stress testing has been undertaken to understand what circumstances would result
in potential breaches of financial covenants over these periods. While the assumptions
applied in these scenarios are possible, they do not represent the Board’s view of the
likely outturn, but the results help inform the Directors’ assessment of the viability
of the Company. The testing indicated that:
• The rate of loss of contractual rent on the borrowing facility with least headroom
would need to deteriorate by 17% (for the going concern assessment period) to breach
its interest cover covenant from the levels included in the Company’s prudent base
case forecasts, assuming no unencumbered properties were charged; or
• To risk breaching the applicable covenant for both assessment periods, property
valuations would have to decrease from the 31 March 2025 position by:
◦ 20% at a portfolio level; or
◦ 13% at an individual charge pool level, assuming no further properties were
charged
Note 10 details the expected movements in the valuation of investment properties if the
equivalent yield at 31 March 2025 is increased or decreased by 0.25% and if the ERV is
increased or decreased by 5.0%, which the Board believes are reasonable sensitivities to
apply given historical changes.
The Board notes that the latest IPF Forecasts for UK Commercial Property Investment
survey suggests an average 2.8% increase in rents during 2025 with capital value
increases of 3.7%. The Board believes that the valuation of the Company’s property
portfolio will prove resilient due to its higher weighting to industrial assets and
overall diverse and high-quality asset and tenant base comprising c.150 assets and over
300 typically 'institutional grade' tenants across all commercial sectors.
Liquidity
At 31 March 2025 the Company had £7.9m of unrestricted cash and £15.0m undrawn RCF, with
gross borrowings of £175.0m resulting in net gearing of 27.9%. As detailed in Note 16,
the Company’s £20m loan with SWIP expires in August 2025 which the Company intends to
repay using its RCF facility.
The Company increased its RCF limit from £50m to £60m in June 2025 ahead of the August
2025 expiry to maintain headroom, with the Company’s forecast model projecting it will
have at least £10.8m of undrawn RCF facility over the next 12 months to continue its
programme of discretionary capital investment, pay its target dividends and its expense
and interest liabilities over the one and three year assessment periods.
Results of the assessments
Based on the prudent assumptions within the Company’s forecasts regarding the factors
set out above, the Directors expect that over the one-year and three-year periods of
their assessment:
• The Company has surplus cash to continue in operation and meet its liabilities as
they fall due;
• Borrowing covenants are complied with; and
• REIT tests are complied with.
Section 172 statement and stakeholder relationships
The Directors consider that in conducting the business of the Company over the course of
the year they have complied with Section 172(1) of the Companies Act 2006 (“the Act”) by
fulfilling their duty to promote the success of the Company and act in the way they
consider, in good faith, would be most likely to promote the success of the Company for
the benefit of its members as a whole.
Issues, factors and stakeholders
The Board has direct engagement with the Company’s shareholders and seeks a rounded and
balanced understanding of the broader impact of its decisions through regular engagement
with its stakeholder groups (detailed below) to understand their views, typically
through feedback from the Investment Manager, the Company’s broker and the distribution
agent, which is regularly communicated to the Board via quarterly meetings. Stakeholder
engagement also ensures the Board is kept aware of any significant changes in the
market, including the identification of emerging trends and risks, which in turn can be
factored into its strategy discussions.
Management of the Company’s day-to-day operations has been delegated to the Investment
Manager, Custodian Capital Limited, and the Company has no employees. This externally
managed structure allows the Board and the Investment Manager to have due regard to the
impact of decisions on the following matters specified in Section 172 (1) of the Act:
Section 172(1) factor
Approach taken
The business model and strategy of the Company is set out
within the Strategic Report. Any deviation from or
amendment to that strategy is subject to Board and, if
necessary, shareholder approval. The Company’s Management
Engagement Committee ensures that the Investment Manager is
operating within the scope of the Company’s investment
objectives.
At least annually, the Board considers a budget for the
delivery of its strategic objectives based on a three year
forecast model. The Investment Manager reports
non-financial and financial key performance indicators to
the Board, set out in detail in the Business model and
strategy section of the Strategic report, at least quarterly
which are used to assess the outcome of decisions made.
Likely consequences of any
decision in the long-term
The Board’s commitment to keeping in mind the long-term
consequences of its decisions underlies its focus on risk,
including risks to the long-term success of the business.
The investment strategy of the Company is focused on medium
to long-term returns and minimising the Company’s impact on
communities and the environment and as such the long-term is
firmly within the sights of the Board when all material
decisions are made.
The Board gains an understanding of the views of the
Company’s key stakeholders from the Investment Manager,
broker, distribution agents and Management Engagement
Committee, and considers those stakeholders’ interests and
views in board discussions and long-term decision-making.
The Company has no employees as a result of its external
management structure, but the Directors have regard to the
interests of the individuals responsible for delivery of the
property management and administration services to the
The interests of the Company to the extent that they are able to.
Company’s employees
The Company’s Nominations Committee is responsible for
applying the diversity policy set out in the Nominations
Committee report to Board recruitment.
Business relationships with suppliers, tenants and other
counterparties are managed by the Investment Manager.
Suppliers and other counterparties are typically
professional firms such as lenders, property agents and
other property professionals, accounting firms and legal
firms and tenants with which the Investment Manager often
has a longstanding relationship. Where material
counterparties are new to the business, checks, including
anti money laundering checks where appropriate, are
conducted prior to transacting any business to ensure that
The need to foster the no reputational or legal issues would arise from engaging
Company’s business with that counterparty. The Company also periodically
relationships with reviews the compliance of all material counterparties with
suppliers, customers and relevant laws and regulations such as the Modern Slavery Act
others 2015 and environmental practices. The Company pays
suppliers in accordance with pre-agreed terms. The
Management Engagement Committee engages directly with the
Company’s key service providers where necessary providing a
direct line of communication for receiving feedback and
resolving issues.
The Investment Manager has open lines of communication with
tenants and can understand and resolve any issues promptly.
The Board recognises the importance of supporting local
communities where the Company’s assets are located and seeks
to invest in properties which will be fit for future purpose
and which align with ESG targets. The Company also seeks to
benefit local communities by creating social value through
employment, viewing its properties as a key part of the
fabric of the local economy.
The impact of the Company’s
operations on the community
and the environment The Board takes overall responsibility for the Company’s
impact on the community and the environment and its ESG
policies are set out in the ESG Committee report.
The Company’s approach to preventing bribery, money
laundering, slavery and human trafficking is disclosed in
the Governance report.
The Board believes that the ability of the Company to
conduct its investment business and finance its activities
depends in part on the reputation of the Board and
The desirability of the Investment Manager’s team. The risk of falling short of the
Company maintaining a high standards expected and thereby risking its business
reputation for high reputation is included in the Board’s review of the
standards of business Company’s risk register, which is conducted periodically.
conduct The principal risks and uncertainties facing the business
are set out in that section of the Strategic Report. The
Company’s requirements for a high standard of conduct and
business ethics are set out in the Governance report.
The Company’s shareholders are a very important stakeholder
group. The Board oversees the Investment Manager’s investor
relations programme which involves the Investment Manager
engaging routinely with the Company’s shareholders. The
programme is managed by the Company’s broker and
distribution agents and the Board receives prompt feedback
on the outcomes of meetings and presentations. The Board
and Investment Manager aim to be open with shareholders and
available to them, subject to compliance with relevant
securities laws. The Chairman of the Company and other
Non-Executive Directors make themselves available for
The need to act fairly as meetings as appropriate and attend the Company’s AGM.
between members of the
Company
The investor relations programme is designed to promote
formal engagement with investors and is typically conducted
after each half-yearly results announcement. The Investment
Manager also engages with existing investors who may request
meetings and with potential new investors on an ad hoc basis
throughout the year, including where prompted by Company
announcements. Shareholder presentations are made available
on the Company’s website. The Company has a single class of
share in issue with all members of the Company having equal
rights.
Methods used by the Board
The main methods used by the Directors to perform their duties include:
• Board Strategy meetings are held typically annually to review all aspects of the
Company’s business model and strategy and assess the long-term success of the
Company and its impact on key stakeholders;
• The Management Engagement Committee assesses the Company’s engagements with its key
service providers. The Investment Manager reports on their performance to the
Committee which in turn reports key issues to the Board. The responsibilities of
the Management Engagement Committee are detailed in the Management Engagement
Committee report;
• The Board is ultimately responsible for the Company’s ESG activities set out in the
ESG Committee report, which it believes are a key part of benefitting the local
communities where the Company’s assets are located;
• The Board’s risk management procedures set out in the Governance report identify the
potential consequences of decisions in the short, medium and long-term so that
mitigation plans can be put in place to prevent, reduce or eliminate risks to the
Company and wider stakeholders;
• The Board sets the Company’s purpose, values and strategy, detailed in the Business
model and strategy section of the Strategic report, and the Investment Manager
ensures they align with its culture;
• The Board carries out direct shareholder engagement via the AGM and Directors attend
shareholder meetings on an ad hoc basis;
• External assurance is received through internal and external audits and reports from
brokers and advisers;
• Specific training for existing Directors and induction for new Directors as set out
in the Governance report; and
• Ad hoc meetings to consider corporate acquisition opportunities.
Principal decisions in the year
The Board has delegated operational functions to the Investment Manager and other key
service providers. In particular, responsibility for management of the Company’s
property portfolio has been delegated to the Investment Manager. The Board retains
responsibility for reviewing the engagement of the Investment Manager and exercising
overall control of the Company, reserving certain key matters as set out in the
Governance report. The principal non-routine decisions taken by the Board during the
year, and its rationale on how the decision was made, were:
Decision How decision was made
Setting target dividends at In line with the Board’s dividend policy of paying a high,
6.0pps for the year ending 31 fully covered level of dividend which maximises
March 2026. shareholder returns without negatively influencing
property strategy.
Extending the RCF by one year To mitigate refinancing risk and secure the existing
to move expiry from November competitive margin for a further year.
2026 to 2027.
Appointing a new Director as The Board believes Nathan Imlach brings a wealth of
detailed in the Chairman’s experience which will benefit shareholders.
statement.
The Company has undertaken property, legal, financial and
tax due diligence work on Merlin and the Investment
Manager modelled the combined entity to understand the
projected short and medium-term impact of the Acquisition
on the combined portfolio and its earnings. The Board
Acquiring Merlin Properties constituted an Acquisition Committee comprising Malcolm
Limited in an all-paper Cooper and Chris Ireland which held regular meetings to
transaction on an adjusted understand and oversee progress and any issues arising to
NAV-for-NAV basis. remain in position to make decisions as they arose. The
key challenges faced by the Acquisition Committee and
Board focused on ensuring forecasts and potential risks
were accurately identified to ensure the transaction was
in the best long-term interests of all stakeholders by
increasing long-term earnings within the Company’s stated
investment policy.
Due to the nature of these decisions, a variety of stakeholders had to be factored into
the Board’s discussions. Each decision was announced at the time, so that all
stakeholders were aware of the decisions.
Stakeholders
The Board recognises the importance of stakeholder engagement to deliver its strategic
objectives and believes its stakeholders are vital to the continued success of the
Company. The Board is mindful of stakeholder interests and keeps these at the forefront
of business and strategic decisions. Regular engagement with stakeholders is
fundamental to understanding their views. The below section highlights how the Company
engages with its key stakeholders, why they are important and the impact they have on
the Company and therefore its long-term success, which the Board believes helps
demonstrate the successful discharge of its duties under s172(1) of the Act. The Board
assesses the effectiveness of stakeholder engagement through discussion with the
Investment Manager and the Company’s broker and distribution agent.
Stakeholder Stakeholder interests Stakeholder engagement
• Regular dialogue
Tenants • Review published data,
such as accounts, trading
The Investment Manager • High quality assets updates and analysts’
understands the businesses • Profitability reports
occupying the Company’s assets • Efficient operations • Ensured buildings comply
and seeks to create long-term • Knowledgeable and with safety regulations
partnerships and understand committed landlord and insurance requirements
their needs to deliver fit for • Flexibility to adapt • Certain tenants contacted
purpose real estate and to the changing UK to request environmental
develop asset management commercial landscape performance data and offer
opportunities to underpin • Buildings with strong an engagement programme on
long-term maintainable income environmental their premises’
growth and maximise occupier credentials environmental performance
satisfaction • Occupancy has remained
above 90% during the year
The Investment Manager and its
employees • Long-term viability of
the Company • Board and Committee
As an externally managed fund • Long-term relationship meetings
the Company’s key service with the Company • Face-to-face and
provider is the Investment • Well-being of the video-conference meetings
Manager and its employees are Investment Manager’s with the Chairman and
a key stakeholder. The employees other Board Directors
Investment Manager’s culture • Being able to attract • Quarterly KPI reporting to
aligns with that of the and retain the Board
Company and its long-standing high-calibre staff • Board evaluation,
reputation of operating in the • Maintaining a positive including feedback from
smaller lot-size market is key and transparent key Investment Manager
when representing the Company relationship with the personnel
Board • Ad hoc meetings and calls
Suppliers • Board and Committee
• Collaborative and meetings which certain key
A collaborative relationship transparent working suppliers attend
with our suppliers, including relationships • One-to-one meetings
those to whom key services are • Responsive • Annual review of key
outsourced, ensures that we communication service provider
receive high quality services • Being able to deliver engagements by the
to help deliver strategic and service level Management Engagement
investment objectives agreements Committee, which includes
appropriateness of
internal policies and
payment practices
• Annual and half year
presentations
• Maintainable growth • AGM
Shareholders • Attractive level of • Market announcements and
income returns corporate website
Building a strong investor • Strong Corporate • Regular investor feedback
base through clear and Governance and received from the
transparent communication is environmental Company’s broker,
vital to building a successful credentials distribution agents and PR
business and generating • Transparent reporting adviser as well as seeking
long-term growth framework feedback from face-to-face
meetings
• On-going dialogue with
analysts
Lenders
• Stable cash flows
Our lenders play an important • Stronger covenants
role in our business. The • Being able to meet
Investment Manager maintains interest payments
close and supportive • Maintaining agreed • Quarterly covenant
relationships with this group gearing ratios reporting
of long-term stakeholders, • Regular financial • Regular catch-up calls
characterised by openness, reporting
transparency and mutual • Proactive notification
understanding of issues or changes
• Openness and
Government, local authorities transparency
and communities • Proactive compliance
with new legislation
As a responsible corporate • Proactive engagement
citizen the Company is • Support for local • Engagement with local
committed to engaging economic and authorities where we
constructively with central environmental plans operate
and local government and and strategies • Two way dialogue with
ensuring we support the wider • Playing its part in regulators and HMRC when
community providing the real required
estate fabric of the
economy, giving
employers a place of
business
Approval of Strategic report
The Strategic report, (incorporating the Business model and strategy, Chairman’s
statement, Investment Manager’s report, Financial report, Principal risks and
uncertainties and Section 172 statement and stakeholder relationships) was approved by
the Board of Directors and signed on its behalf by:
David MacLellan
Chairman
11 June 2025
Board of Directors and Investment Manager personnel
The Board comprises six non-executive directors. A short biography of each director is
set out below:
David MacLellan - Independent Chairman
David was appointed to the Board on 9 May 2023 and took over the Chairman role on 8
August 2023.
He has over 35 years’ experience in private equity and fund management and an
established track record as Chairman and Non-Executive director of public and private
companies. During his executive career David was an Executive Director of Aberdeen
Asset Management plc following its purchase of Murray Johnstone Limited (“MJ”) in
2000. At the time of the purchase he was Group Managing Director of MJ, a Glasgow based
fund manager managing inter alia closed and open ended funds, having joined MJ’s venture
capital team in 1984. Prior to joining MJ he qualified as a Chartered Accountant at
Arthur Young McLelland Moores (now EY).
David is currently Chairman and Managing Partner of RJD Partners, a private equity
business; Non-Executive Director and Audit Committee Chairman of Lindsell Train
Investment Trust plc, a closed-ended equity investment fund; Non-Executive Director and
Audit Committee Chair of J&J Denholm Limited, a family owned business involved in
shipping, logistics, seafoods and industrial services; and Non-Executive Director and
Audit Committee Chair of Aquila Renewables plc, an investment trust.
David is former Chairman and Senior Independent Director (“SID”) of John Laing
Infrastructure Fund, a FTSE 250 investment company, former Chairman of Stone
Technologies Limited, former Chairman of Havelock Europa plc and former Non-Executive
Director of Maven Income & Growth VCT 2 plc. He was also Chairman of Britannic UK
Income Fund for 12 years until 2013 as well as a director of a number of private equity
backed businesses.
David’s other roles are not considered to impact his ability to allocate sufficient time
to the Company to discharge his responsibilities effectively.
Elizabeth McMeikan – Senior Independent Director
Elizabeth’s substantive career was with Tesco plc, where she was a Stores Board Director
before embarking on a non-executive career in 2005.
Elizabeth is currently Chair of Nichols plc, the AIM listed diversified soft drinks
group. She is SID and Remuneration Committee Chair at both Dalata Hotel Group plc, the
largest hotel group in Ireland, and at McBride plc, Europe’s leading manufacturer of
cleaning and hygiene products. She is also Non-Executive Director of Fresca Group
Limited, a fruit and vegetable grower and importer.
Previously Elizabeth was SID and Remuneration Committee Chair at both The Unite Group
plc and at Flybe plc, SID at J D Wetherspoon plc and Chair of Moat Homes Limited.
Elizabeth’s other roles are not considered to impact her ability to allocate sufficient
time to the Company to discharge her responsibilities effectively.
Hazel Adam - Independent Director
Hazel was an investment analyst with Scottish Life until 1996 and then joined Standard
Life Investments. As a fund manager she specialised in UK and then Emerging Market
equities. In 2005 Hazel joined Goldman Sachs International as an executive director on
the new markets equity sales desk before moving to HSBC in 2012, holding a similar
equity sales role until 2016.
Hazel was an independent non-executive director of Aberdeen Latin American Income Fund
Limited until June 2023 and holds the CFA Level 4 certificate in ESG Investing and the
Financial Times Non-Executive Directors Diploma.
Chris Ireland FRICS - Independent Director
Chris joined international property consultancy King Sturge in 1979 as a graduate and
has worked his whole career across the UK investment property market. He ran the
investment teams at King Sturge before becoming Joint Managing Partner and subsequently
Joint Senior Partner prior to its merger with JLL in 2011.
Chris was Chief Executive Officer of JLL UK between 2016 and 2021 and subsequently its
Chair from 2021 until retiring in March 2023.
Chris is a former Chair of the Investment Property Forum and is a Non-Executive Director
of Le Masurier, a Jersey based family trust with assets across the UK, Germany and
Jersey. Chris is also a keen supporter of the UK homelessness charity Crisis.
Chris’ other roles are not considered to impact his ability to allocate sufficient time
to the Company to discharge his responsibilities effectively.
Malcolm Cooper FCCA FCT - Independent Director
Malcolm is a qualified accountant and an experienced FTSE 250 company Audit Committee
Chair with an extensive background in corporate finance and a wide experience in
infrastructure and property.
Malcolm worked with Arthur Andersen and British Gas/BG Group/Lattice before spending 15
years with National Grid with roles including Managing Director of National Grid
Property and Global Tax and Treasury Director, and culminated in the successful sale of
a majority stake in National Grid’s gas distribution business, now known as Cadent Gas.
Malcolm is currently Chair of MORhomes plc, SID and Audit Committee Chair at Southern
Water Services Limited and Non-Executive Director and Audit and Risk Committee Chair at
Local Pensions Partnership Investment.
Malcolm was previously: a Non-Executive Director of Morgan Sindall Group plc, a FTSE 250
UK construction and regeneration business, Chairing its Audit and Responsible Business
Committees; SID and Audit Committee Chair at CLS Holdings plc; a Non-Executive Director
of St William Homes LLP; President of the Association of Corporate Treasurers and a
member of the Financial Conduct Authority’s Listing Authority Advisory Panel.
Malcolm’s other roles are not considered to impact his ability to allocate sufficient
time to the Company to discharge his responsibilities effectively.
Nathan Imlach CA FCSI CF - Director
Nathan was appointed to the Board on 6 November 2024 for a transition period up until no
later than the end of 2025 following Ian Mattioli stepping down as a Company Director to
focus on his role as Chief Executive Officer of Mattioli Woods following its recent
transition to private ownership. Nathan is currently Chief Strategic Adviser to
Mattioli Woods with a focus on acquisitions and contributing to its future direction.
Nathan is also currently SID of Mortgage Advice Bureau (Holdings) plc and is a patron
and former trustee of Leicester Grammar School Trust. He is a chartered accountant,
holds the ICAEW’s Corporate Finance qualification and is a Chartered Fellow of the
Chartered Institute for Securities and Investment. From 2005 to 2020 Nathan was Chief
Financial Officer of Mattioli Woods, Company Secretary of Custodian Property Income REIT
and a director of Custodian Capital Limited. Before this, Nathan gained over 15 years’
experience as a corporate finance adviser to directors of leading organisations in both
the private and public sectors, gaining international experience across a wide range of
transactions throughout Europe, North America and Australia.
Nathan is a non-independent Director of the Company due to his role with Mattioli Woods
and is viewed by the Board as representative of Mattioli Woods’ client shareholders
which represent approximately 65% of the Company’s shareholders.
Nathan’s other roles are not considered to impact his ability to allocate sufficient
time to the Company to discharge his responsibilities effectively.
Investment Manager personnel
Short biographies of the Investment Manager’s key personnel and senior members of its
property team are set out below:
Richard Shepherd-Cross MRICS - Managing Director
Richard qualified as a Chartered Surveyor in 1996 and until 2008 worked for JLL,
latterly running its national portfolio investment team.
Since joining Mattioli Woods in 2009, Richard established Custodian Capital as the
Property Fund Management subsidiary to Mattioli Woods and in 2014 was instrumental in
the establishment of Custodian Property Income REIT from Mattioli Woods’ syndicated
property portfolio and its 1,200 investors. Following the successful IPO of the
Company, Richard has overseen the growth of the Company to its current property
portfolio of over £0.6bn.
Ed Moore FCA – Finance Director
Ed qualified as a Chartered Accountant in 2003 with Grant Thornton, specialising in
audit, financial reporting and internal controls across its Midlands practice. He is
Finance Director of Custodian Capital with responsibility for all day-to-day financial
aspects of its operations.
Since IPO in 2014 Ed has overseen the Company raising over £300m of new equity,
arranging or refinancing eight loan facilities and completing four corporate
acquisitions, including leading on the acquisition of DRUM in 2021. Ed’s key
responsibilities for Custodian Property Income REIT are accurate external and internal
financial reporting, ongoing regulatory compliance and maintaining a robust control
environment. Ed is Company Secretary of Custodian Property Income REIT and is a member
of the Investment Manager’s Investment Committee. Ed is also responsible for the
Investment Manager’s environmental initiatives, attending Custodian Property Income REIT
ESG Committee meetings and co-leading the Investment Manager’s ESG working group.
Ian Mattioli MBE - Founder and Chair
With nearly 40 years’ experience in financial services, wealth management and property
businesses, Ian is responsible for the vision and operational management of Mattioli
Woods. With this experience he instigated the development of Mattioli Woods’ investment
proposition, including the syndicated property initiative that developed the seed
portfolio for the launch of Custodian Property Income REIT plc in 2014.
Outside of work, Ian has many personal achievements, including winning the London Stock
Exchange AIM Entrepreneur of the Year award and CEO of the Year in the 2018 City of
London Wealth Management Awards. He was also awarded an MBE in the Queen’s 2017 New
Year’s Honours lists for services to business and the community in Leicestershire. More
locally, Ian was awarded an honorary degree (Doctor of Laws) by the University of
Leicester and was appointed High Sheriff of Leicestershire for 2021/22.
Ian and his close family own 6.4m shares in the Company.
Alex Nix MRICS – Assistant Investment Manager
Alex graduated from Nottingham Trent University with a degree in Real Estate Management
before joining Lambert Smith Hampton, where he spent eight years and qualified as a
Chartered Surveyor in 2006.
Alex is Assistant Investment Manager to Custodian Property Income REIT having joined
Custodian Capital in 2012. Alex heads the Company’s property management and asset
management initiatives, assists in sourcing and executing new investments and is a
member of the Investment Manager’s Investment Committee.
James Hunt MRICS – Portfolio Manager
James joined Custodian as Portfolio Manager in January 2025 bringing 15 years of
commercial real estate experience from previous consultancy and client-side roles, most
recently with the portfolio management team at St Modwen Logistics. James previously
studied Real Estate Management at Nottingham Trent University and qualified as a
Chartered Surveyor in 2014.
As Portfolio Manager, James manages Custodian’s properties predominantly in the Midlands
and Scotland.
Eoin Greenwood MRICS – Portfolio Manager
Eoin joined Custodian in 2018 where he successfully graduated from The University
College of Estate Management with a remote learning degree in Real Estate Management.
After five years Eoin joined Buccleuch Property, managing a £130m mixed use UK
commercial portfolio for the Buccleuch family office before returning to Custodian
Capital in 2024 where he recently qualified as a Charted Surveyor.
As Portfolio Manager, Eoin now manages Custodian’s properties predominantly in the
South-west and South-east of England.
Javed Sattar MRICS – Portfolio Manager
Javed joined Custodian Capital in 2011 after graduating from Birmingham City University
with a degree in Estate Management Practice. Whilst working as a trainee surveyor on
Custodian Property Income REIT’s property portfolio for Custodian Capital he completed a
PGDip in Surveying via The College of Estate Management and qualified as a Chartered
Surveyor in 2017.
Javed operates as Portfolio Manager managing properties predominantly located in the
North-West of England.
Consolidated statement of comprehensive income
For the year ended 31 March 2025
Year ended Year ended
31 March 31 March
2025 2024
Note £000 £000
Revenue 4 47,997 46,243
Investment management fees (3,417) (3,451)
Operating expenses of rental property
• rechargeable to tenants (3,562) (3,280)
• directly incurred (4,891) (3,899)
Professional fees (823) (791)
Directors’ fees (345) (349)
Other expenses (814) (683)
Depreciation (285) (133)
Expenses (14,137) (12,586)
Abortive acquisition costs - (1,557)
Operating profit before gains/(losses) on investment property
and financing
33,860 32,100
Unrealised profit/(loss) on revaluation of investment
property:
10 11,211 (26,972)
• relating to property revaluations
• relating to costs of acquisition 10 (1) -
Valuation increase/(decrease) 11,210 (26,972)
Profit on disposal of investment property 444 1,418
Net gain/(loss) on investment property 11,654 (25,554)
Operating profit 45,514 6,546
Finance income 6 127 78
Finance costs 7 (7,486) (8,126)
Net finance costs (7,359) (8,048)
Profit/(loss) before tax 38,155 (1,502)
Income tax expense 8 - -
Profit/(loss) for the year, net of tax 38,155 (1,502)
Other comprehensive income 11 714 -
Total comprehensive income/(loss) for the year, net of tax 38,869 (1,502)
Earnings per ordinary share:
Basic and diluted (p) 3 8.7 (0.3)
Basic and diluted EPRA (p) 3 6.1 5.8
The profit/(loss) for the year and total comprehensive income/(loss) for the year arise
from continuing operations and is all attributable to owners of the Company. Other
comprehensive income represents items that will not be subsequently reclassified to
profit or loss.
Consolidated and Company statement of financial position
As at 31 March 2025
Registered number: 08863271
31 March 2025 31 March 2024
Note £000 £000
Group and Company
Non–current assets
Investment property 10 594,364 578,122
Property, plant and equipment 11 4,711 2,957
Investments 12 - -
Total non-current assets 599,075 581,079
Current assets
Assets held for sale 10 - 11,000
Trade and other receivables 13 5,201 3,330
Cash and cash equivalents 15 10,118 9,714
Total current assets 15,319 24,044
Total assets 614,394 605,123
Equity
Issued capital 17 4,409 4,409
Share premium 17 250,970 250,970
Merger reserve 17 18,931 18,931
Retained earnings 17 148,442 137,510
Revaluation reserve 17 714 -
Total equity attributable to equity holders of the 423,466 411,820
Company
Non-current liabilities
Borrowings 16 153,641 177,290
Other payables 14 2,087 569
Total non-current liabilities 155,728 177,859
Current liabilities
Borrowings 16 19,989 -
Trade and other payables 14 7,029 8,083
Deferred income 8,182 7,361
Total current liabilities 35,200 15,444
Total liabilities 190,928 193,303
Total equity and liabilities 614,394 605,123
The parent Company’s profit for the year was £38,155,000 (2024: loss of £1,502,000).
These consolidated and Company financial statements of Custodian Property Income REIT
plc, company number 08863271, were approved and authorised for issue by the Board of
Directors on 11 June 2025 and are signed on its behalf by:
David MacLellan
Chairman
Consolidated and Company statements of cash flows
For the year ended 31 March 2025
Year
Year ended
ended
Group and Company 31 March
31 March
2025
2024
Note £000 £000
Operating activities
Profit/(loss) for the year 38,155 (1,502)
Net finance costs 7,359 8,048
Valuation (increase)/decrease of investment property 10 (11,211) 26,972
Impact of lease incentives 10 (1,470) (2,105)
Amortisation of right-of-use asset 7 7
Profit on disposal of investment property (444) (1,418)
Depreciation 285 133
Cash flows from operating activities before changes in working
capital and provisions
32,681 30,135
(Increase)/decrease in trade and other receivables (1,871) 418
Increase in trade and other payables and deferred income 1,286 357
Cash generated from operations 32,096 30,910
Interest and other finance charges 7 (7,068) (7,694)
Net cash inflows from operating activities 25,028 23,216
Investing activities
Capital expenditure on investment property 10 (6,843) (17,034)
Purchase of property, plant and equipment 11 (1,326) (1,977)
Disposal of investment property and assets held-for-sale 15,050 18,176
Costs of disposal of investment property (331) (134)
Interest and finance income received 6 127 78
Net cash inflows/(outflows) from investing activities 6,677 (891)
Financing activities
New borrowings 16 - 5,500
Repayment of borrowings and origination costs 16 (4,078) (744)
Dividends paid 9 (27,223) (24,247)
Net cash outflow from financing activities (31,301) (19,491)
Net increase in cash and cash equivalents 404 2,834
Cash and cash equivalents at start of the year 9,714 6,880
Cash and cash equivalents at end of the year 10,118 9,714
Consolidated and Company statement of changes in equity
For the year ended 31 March 2025
Issued Merger Share Revaluation Retained Total
reserve reserve
capital premium earnings equity
£000 £000
Note £000 £000 £000 £000
Group and Company
As at 31 March 2023 4,409 18,931 250,970 - 163,259 437,569
Loss for the year - - - - (1,502) (1,502)
Total comprehensive loss for - - - - (1,502) (1,502)
year
Transactions with owners of
the Company, recognised
directly in equity
Dividends 9 - - - - (24,247) (24,247)
As at 31 March 2024 4,409 18,931 250,970 - 137,510 411,820
Profit for the year - - - - 38,155 38,155
Revaluation of property, 11 - - - 714 - 714
plant and equipment
Total comprehensive profit - - - 714 38,155 38,869
for year
Transactions with owners of
the Company, recognised
directly in equity
Dividends 9 - - - - (27,223) (27,223)
As at 31 March 2025 4,409 18,931 250,970 714 148,442 423,466
Notes to the financial statements for the year ended 31 March 2025
1. Corporate information
The Company is a public limited company incorporated and domiciled in England and Wales,
whose shares are publicly traded on the London Stock Exchange plc’s main market for
listed securities. The consolidated and parent company financial statements have been
prepared on a historical cost basis, except for the revaluation of investment property,
and are presented in pounds sterling with all values rounded to the nearest thousand
pounds (£000), except when otherwise indicated. The consolidated financial statements
were authorised for issue in accordance with a resolution of the Directors on 11
June 2025.
2. Basis of preparation and accounting policies
1. Basis of preparation
The consolidated financial statements and the separate financial statements of the
parent company have been prepared in accordance with United Kingdom adopted
international accounting standards and International Financial Reporting Standards
(IFRSs).
The Company has taken advantage of the exemption in section 408 of the Companies Act
2006 not to present its own statement of comprehensive income.
Certain statements in this report are forward looking statements. By their nature,
forward looking statements involve a number of risks, uncertainties or assumptions that
could cause actual results or events to differ materially from those expressed or
implied by those statements. Forward looking statements regarding past trends or
activities should not be taken as representation that such trends or activities will
continue in the future. Accordingly, undue reliance should not be placed on forward
looking statements.
2. Basis of consolidation
The consolidated financial statements consolidate those of the parent company and its
subsidiaries. The parent controls a subsidiary if it is exposed, or has rights, to
variable returns from its involvement with the subsidiary and has the ability to affect
those returns through its power over the subsidiary. Custodian Real Estate Limited has
a reporting date in line with the Company. All transactions and balances between group
companies are eliminated on consolidation, including unrealised gains and losses on
transactions between group companies. Where unrealised losses on intra-group asset
sales are reversed on consolidation, the underlying asset is also tested for impairment
from a group perspective. Amounts reported in the financial statements of the
subsidiary are adjusted where necessary to ensure consistency with the accounting
policies adopted by the Group. Profit or loss and other comprehensive income of
subsidiaries acquired or disposed of during the year are recognised from the effective
date the Company gains control up to the effective date when the Company ceases to
control the subsidiary.
Change in accounting policy
The Company has changed its accounting policy for PV from cost less accumulated
depreciation to fair value, as determined by the Company’s independent valuers, with
effect from 31 March 2025. This change in policy has been made because at 31 March 2025
certain of the Company’s PV arrays have been fully operational 32 27 for at least 12
months, providing accurate annual revenue and cost data which incorporates:
• Energy production per panel;
• The import/export ratio (based on tenant usage and all metering being operational);
and
• Seasonal/local changes in both of the above (hours of daylight, tenant seasonality,
panel maintenance).
The fair value of PV arrays with less than 12 months of operational data is considered
to be cost less accumulated depreciation. The Board believes that fair valuing PV, using
reliable data that has become available this year, better reflects the Company’s
investment in PV assets within its net asset value. The impact of this change in
accounting policy on the current financial year is:
31 March 2025
£000
Consolidated statement of comprehensive income
Increase in profit for the financial year -
Consolidated and Company statements of financial position
Increase in net assets 714
In subsequent years, this revaluation surplus will be depreciated thus ultimately
recognised within profit or loss. Independent valuations of the Company’s PV portfolio
were not available at 31 March 2024 so this change in accounting policy has been applied
with effect from 31 March 2025, with no changes made to comparative numbers as allowed
by IAS 16 – ‘Property, plant and equipment’.
3. Business combinations
Where property is acquired, via corporate acquisitions or otherwise, the substance of
the assets and activities of the acquired entity are considered in determining whether
the acquisition represents a business combination or an asset purchase under IFRS 3 -
Business Combinations.
A business combination is a transaction or event in which an acquirer obtains control of
one or more businesses. A business is defined in IFRS 3 as an integrated set of
activities and assets that is capable of being conducted and managed for the purpose of
providing goods or services to customers, generating investment income (such as
dividends or interest) or generating other income from ordinary activities. To assist
in determining whether a purchase of investment property via corporate acquisition or
otherwise meets the definition of a business or is the purchase of a group of assets,
the group will apply the optional concentration test in IFRS 3 to determine whether
substantially all of the fair value of the gross assets acquired is concentrated in a
single identifiable asset or group of similar identifiable assets. If the concentration
test is not met the group applies judgement to assess whether acquired set of activities
and assets includes, at a minimum, an input and a substantive process by applying IFRS
3:B8 to B12D. Where such acquisitions are not judged to be a business combination, due
to the asset or group of assets not meeting the definition of a business, they are
accounted for as asset acquisitions and the cost to acquire the corporate entity is
allocated between the identifiable assets and liabilities of the entity based on their
relative fair values at the acquisition date. Accordingly no goodwill or additional
deferred taxation arises.
Under the acquisition accounting method, the identifiable assets, liabilities and
contingent liabilities acquired are measured at fair value at the acquisition date. The
consideration transferred is measured at fair value which is calculated as the sum of
the acquisition-date fair values of assets transferred by the Group, liabilities
incurred by the Group to the former owners of the acquiree and the equity interest
issued by the Group in exchange for control of the acquiree.
4. Application of new and revised International Financial Reporting Standards
During the year the Company adopted the following new standards with no impact on
reported financial performance or position:
• Amendments to IAS 1 - ‘Presentation of Financial Statements’ clarifies that
liabilities are classified as either current or non-current, depending on the rights
that exist at the end of the reporting period and not expectations of, or actual
events after, the reporting date.
• Amendments to IFRS 16 - ‘Lease Liability in a Sale and Leaseback’ specifies the
requirements that a seller-lessee uses in measuring the lease liability arising in a
sale and leaseback transaction, to ensure the seller-lessee does not recognise any
amount of the gain or loss that relates to the right of use it retains.
The following new and revised accounting standards not yet effective:
• IFRS 18 - ‘Presentation and Disclosures in Financial Statements’. This standard on
presentation and disclosure replaces IAS 1, with a focus on updates to the statement
of profit or loss.
• IFRS 19 – ‘Subsidiaries without Public Accountability: Disclosures’. This reduces
disclosure requirements that an eligible subsidiary entity is permitted to apply
instead of the disclosure requirements in other IFRS Accounting Standards.
• Amendments to IFRS 9 – ‘Financial Instruments’ and IFRS 7 – ‘Financial Instruments:
Disclosures’. The amendments provide clarity on the date of recognition and
derecognition of certain financial instruments and amends/updates the disclosure
required for some financial instruments.
The Directors have yet to assess the full outcome of these new standards, amendments and
interpretations; however, with the exception of IFRS 18, these other new standards,
amendments and interpretations are not expected to have a significant impact on the
Group’s financial statements.
5. Material accounting policies
The material accounting policies adopted by the Group and Company and applied to these
financial statements are set out below.
Going concern
The Directors believe the Company is well placed to manage its business risks
successfully and the Company’s projections show that it should be able to operate within
the level of its current financing arrangements for at least the 12 months from the date
of approval of these financial statements, set out in more detail in the Directors’
report and Principal risks and uncertainties section of the Strategic report.
Accordingly, the Directors continue to adopt the going concern basis for the preparation
of the financial statements.
Income recognition
Contractual revenues are allocated to each performance obligation of a contract and
revenue is recognised on a basis consistent with the transfer of control of goods or
services. Revenue is measured at the fair value of the consideration received,
excluding discounts, rebates, VAT and other sales taxes or duties.
Rental income from operating leases on properties owned by the Company is accounted for
on a straight-line basis over the term of the lease. Rental income excludes service
charges and other costs directly recoverable from tenants which are recognised within
‘income from recharges to tenants’.
Amounts received from occupiers to terminate leases or to compensate for dilapidation
work not carried out by the occupier is recognised in the statement of comprehensive
income when the right to receive them arises, typically at the cessation of the lease.
Lease incentives are recognised on a straight-line basis over the lease term. The
initial direct costs incurred in negotiating and arranging an operating lease are
recognised as an expense over the lease term on the same basis.
Revenue and profits on the sale of properties are recognised on the completion of
contracts. The amount of profit recognised is the difference between the sale proceeds
and the carrying amount and costs of disposal.
Finance income relates to bank interest receivable and amounts receivable on ongoing
development funding contracts.
Taxation
The Group operates as a REIT and hence profits and gains from the property rental
business are normally expected to be exempt from corporation tax. The tax expense
represents the sum of the tax currently payable and deferred tax relating to the
residual (non-property rental) business. The tax currently payable is based on taxable
profit for the year. Taxable profit differs from net profit as reported in the
statement of comprehensive income because it excludes items of income and expense that
are taxable or deductible in other years and it further excludes items that are never
taxable or deductible. The Company’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the reporting date.
Investment property
Investment property is held to earn rentals and/or for capital appreciation and is
initially recognised at cost including direct transaction costs. Investment property is
subsequently valued externally on a market basis at the reporting date and recorded at
valuation. Any surplus or deficit arising on revaluing investment property is
recognised in profit or loss in the year in which it arises. Any ultimate gains or
shortfalls are measured by reference to previously published valuations and recognised
in profit or loss, offset against any directly corresponding movement in fair value of
the investment properties to which they relate.
Held-for-sale assets
Non-current assets are classified as held-for-sale if their carrying amount will be
recovered through a sale transaction rather than through continuing use. This condition
is regarded as met only when the sale is highly probable and the asset is available for
immediate sale in its present condition, generally considered to be on unconditional
exchange of contracts. Non-current assets classified as held for sale are valued
externally on a market basis at the reporting date and recorded at valuation.
Group undertakings
Investments are included in the Company only statement of financial position at cost
less any provision for impairment.
Property, plant and equipment
Electric vehicle chargers are stated at cost less accumulated depreciation and
accumulated impairment loss.
PV is valued under the revaluation model of IAS 16 – ‘Property, plant and equipment.
After initial recognition PV arrays whose fair value can be reliably established,
assumed to be once an array has been operational for at least 12 months, are held at the
fair value at the time of the revaluation less any subsequent accumulated depreciation
and impairment losses. Fair value is determined by independent valuers and based on
assumptions including future net income, capital expenditure and appropriate discount
rates (yield). The fair value of assets which have not yet been operational for 12
months is considered equivalent to historical cost less accumulated depreciation (“Net
Book Value” or “NBV”).
Valuation movements:
• Above NBV will be recognised directly within equity (revaluation reserve); and
• Below NBV will be recognised in profit or loss.
Depreciation is recognised so as to write off the carrying value of assets (less their
residual values) over their useful lives, using the straight-line method, on the
following bases:
EV chargers 10 years
PV 30 years
The depreciation charge for PV is:
• Included within profit or loss (classified as property operating expenditure) where
depreciating historical cost; or
• Offset against the revaluation reserve where depreciating the revalued amount.
The estimated useful lives, residual values and depreciation method are reviewed at the
end of each reporting period, with the effect of any changes in estimate accounted for
on a prospective basis. The useful lives of PV cells have been reassessed at 1 April
2024 from 20 years to 30 years based on industry evidence.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and on-demand deposits, and other
short-term highly liquid investments that are held for the purpose of meeting short-term
cash commitments rather than for investment or other purposes and are readily
convertible into a known amount of cash and are subject to an insignificant risk of
changes in value.
Other financial assets
Financial assets and financial liabilities are recognised in the balance sheet when the
Company becomes a party to the contractual terms of the instrument.
The Company’s financial assets include cash and cash equivalents and trade and other
receivables. Interest resulting from holding financial assets is recognised in profit
or loss on an accruals basis.
Trade receivables are initially recognised at their transaction price and subsequently
measured at amortised cost as the business model is to collect the contractual cash
flows due from tenants. An impairment provision is created based on expected credit
losses, which reflect the Company’s historical credit loss experience and an assessment
of current and forecast economic conditions at the reporting date.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance
of the contractual arrangements entered into. An equity instrument is any contract that
evidences a residual interest in the assets of the Company after deducting all of its
liabilities. Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
Share capital represents the nominal value of equity shares issued. Share premium
represents the excess over nominal value of the fair value of the consideration received
for equity shares, net of direct issue costs.
Retained earnings include all current and prior year results as disclosed in profit or
loss. Retained earnings include realised and unrealised profits. Profits are
considered unrealised where they arise from movements in the fair value of investment
properties that are considered to be temporary rather than permanent.
Revaluation reserve represents the unrealised fair value of PV assets in excess of their
historical cost less accumulated depreciation.
Borrowings
Interest-bearing bank loans and overdrafts are recorded at the fair value of proceeds
received, net of direct issue costs. Finance charges, including premiums payable on
settlements or redemption and direct issue costs, are accounted for on an accruals basis
in profit or loss using the effective interest rate method and are included in accruals
to the extent that they are not settled in the period in which they arise.
Trade payables
Trade payables are initially measured at fair value and are subsequently measured at
amortised cost, using the effective interest rate method.
Leases
Where an investment property is held under a leasehold interest, the headlease is
initially recognised as an asset at cost plus the present value of minimum ground rent
payments. The corresponding rental liability to the head leaseholder is included in the
balance sheet as a liability. Lease payments are apportioned between the finance charge
and the reduction of the outstanding liability so as to produce a constant periodic rate
of interest on the remaining lease liability.
Segmental reporting
An operating segment is a distinguishable component of the Company that engages in
business activities from which it may earn revenues and incur expenses, whose operating
results are regularly reviewed by the Company’s chief operating decision maker (the
Board) to make decisions about the allocation of resources and assessment of performance
and about which discrete financial information is available. As the chief operating
decision maker reviews financial information for, and makes decisions about the
Company’s investment properties as a portfolio, the Directors have identified a single
operating segment, that of investment in commercial properties.
6. Key sources of judgements and estimation uncertainty
The preparation of the financial statements requires the Company to make estimates and
assumptions that affect the reported amount of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities. If in the future such
estimates and assumptions, which are based on the Directors’ best judgement at the date
of preparation of the financial statements, deviate from actual circumstances, the
original estimates and assumptions will be modified as appropriate in the period in
which the circumstances change.
Judgements
No significant judgements have been made in the process of applying the Group’s and
parent company's accounting policies, other than those involving estimations, that have
had a significant effect on the amounts recognised within the financial statements.
Estimates
The accounting estimate with a significant risk of a material change to the carrying
values of assets and liabilities within the next year relates to the valuation of
investment property. Investment property is valued at the reporting date at fair
value. Where an investment property is being redeveloped the property continues to be
treated as an investment property. Surpluses and deficits attributable to the Company
arising from revaluation are recognised in profit or loss. Valuation surpluses
reflected in retained earnings are not distributable until realised on sale. In making
its judgement over the valuation of properties, the Company considers valuations
performed by the independent valuers in determining the fair value of its investment
properties. The valuers make reference to market evidence of transaction prices for
similar properties. The valuations are based upon assumptions including future rental
income, anticipated capital expenditure and maintenance costs (particularly in the
context of mitigating the impact of climate change) and appropriate discount rates (ie
property yields). The key sources of estimation uncertainty within these inputs above
are future rental income and property yields. Reasonably possible changes to these
inputs across the portfolio would have a material impact on its valuation. The valuers
have considered
the impact of climate change which has not had a material impact on the valuation.
Further detail on the Company’s climate related risks are set out in the Asset
Management and Sustainability report.
The sensitivity analysis in Note 10 details the expected movements in the valuation of
investment properties and PV if the equivalent yield at 31 March 2024 is increased or
decreased by 0.25% and if the ERV is increased or decreased by 5.0%, which the Board
believes are reasonable sensitivities to apply given historical changes.
3. Earnings per ordinary share
Basic EPS amounts are calculated by dividing net profit for the year by the weighted
average number of ordinary shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the net profit attributable to ordinary
equity holders of the Company by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of ordinary shares that
would be issued on the conversion of all the dilutive potential ordinary shares into
ordinary shares. There are no dilutive instruments in issue. Any shares issued after
the year end are disclosed in Note 21.
The Company is a FTSE EPRA/NAREIT index series constituent and EPRA performance measures
have been disclosed to facilitate comparability with the Company’s peers through
consistent reporting of key performance measures. EPRA has issued recommended bases for
the calculation of EPS as alternative indicators of performance.
Year Year
ended ended
31 March 31 March
2025 2024
Group
Net profit/(loss) for the year (£000) 38,155 (1,502)
Net (gains)/losses on investment property and depreciation (£000) (11,369) 25,687
Abortive acquisition costs - 1,557
EPRA net profit attributable to equity holders of the Company (£000) 26,786 25,742
Weighted average number of ordinary shares:
Issued ordinary shares at start of the year (thousands) 440,850 440,850
Effect of shares issued during the year (thousands) - -
Basic and diluted weighted average number of shares (thousands) 440,850 440,850
Basic and diluted EPS (p) 8.7 (0.3)
Basic and diluted EPRA EPS (p) 6.1 5.8
4. Revenue
Year Year
ended ended
31 March 31 March
2025 2024
£000 £000
Gross rental income from investment property 42,828 42,194
Income from recharges to tenants 3,562 3,280
Income from dilapidations 1,131 574
Other income 476 195
47,997 46,243
5. Operating profit
Operating profit is stated after (crediting)/charging:
Year Year
ended ended
31 March 31 March
2025 2024
£000 £000
Profit on disposal of investment property (444) (1,418)
Investment property valuation (increase)/decrease (11,211) 26,972
Fees payable to the Company’s auditor and its associates for the audit
of the Company’s annual financial statements
171 163
Fees payable to the Company’s auditor and its associates for the 39 37
interim review
Administrative fee payable to the Investment Manager 494 511
Directly incurred operating expenses of vacant rental property 1,886 1,968
Directly incurred operating expenses of let rental property 2,081 1,124
Amortisation of right-of-use asset 7 7
Fees payable to the Company’s auditor, Deloitte, are further detailed in the Audit and
Risk Committee report.
6. Finance income
Year Year
ended
ended
31 March
31 March
2025
2024
£000
£000
Bank interest 127 78
127 78
7. Finance costs
Year
ended Year ended
31 March 31 March
2025 2024
£000 £000
Amortisation of arrangement fees on debt facilities 418 432
Other finance costs 443 113
Bank interest 6,625 7,581
7,486 8,126
8. Income tax
The tax charge assessed for the year is lower than the standard rate of corporation tax
in the UK during the year of 25.0% (2024: 25.0%). The differences are explained below:
Year
ended Year ended
31 March 31 March
2025 2024
£000 £000
Profit/(loss) before income tax 38,155 (1,502)
Tax charge on profit at a standard rate of 25.0% 9,539 (376)
Effects of:
REIT tax exempt rental profits and gains (9,539) 376
Income tax expense - -
Effective income tax rate 0.0% 0.0%
The Company operates as a REIT and hence profits and gains from the property rental
business are normally exempt from corporation tax.
9. Dividends
Year Year
ended ended
31 March 31 March
2025 2024
£000 £000
Group and Company
Interim dividends paid on ordinary shares relating to the quarter
ended:
Prior year
- 31 March 2024: 1.375p 6,062 6,062
Special equity dividends paid on ordinary shares relating to the year
ended:
- 31 March 2024: 0.3p 1,322 -
Current year
- 30 June 2024: 1.5p (2023: 1.375p) 6,613 6,061
- 30 September 2024: 1.5p (2023: 1.375p) 6,613 6,062
- 31 December 2024: 1.5p (2023: 1.375p) 6,613 6,062
27,223 24,247
The Company paid a fourth interim dividend relating to the quarter ended 31 March 2025
of 1.5p per ordinary share (£6.6m) on Friday 30 May 2025 which has not been included as
liabilities in these financial statements.
10. Investment property and assets held for sale
Assets held-for-sale
At 31 March 2025 At 31 March 2024
Group and Company £000 £000
Balance at the start of the year 11,000 -
Disposals (11,000) -
Reclassification from investment property - 11,000
Balance at the end of the year - 11,000
Investment property
Company
£000
Group and Company
At 31 March 2023 613,587
Impact of lease incentives and lease costs 2,105
Amortisation of right-of-use asset (7)
Capital expenditure 17,034
Disposals (16,625)
Valuation decrease (26,972)
Reclassification as held-for-sale (11,000)
At 31 March 2024 578,122
Impact of lease incentives and lease costs 1,470
Amortisation of right-of-use asset (7)
Capital expenditure 6,843
Disposals (3,275)
Valuation increase 11,211
At 31 March 2025 594,364
£490.9m (2024: £486.8m) of investment property was charged as security against the
Company’s borrowings at the year end. £0.6m (2024: £0.6m) of investment property
comprises right-of-use assets.
The carrying value of investment property at 31 March 2025 comprises £506.5m freehold
(2024: £493.0m) and £87.9m leasehold property (2024: £85.1m). The aggregate historical
cost of investment property and assets held-for-sale was £629.8m (2024: £637.6m).
Investment property is stated at the Directors’ estimate of its 31 March 2025 fair
value. Savills (UK) Limited (“Savills”) and Knight Frank LLP (“KF”), professionally
qualified independent valuers, each valued approximately half of the property portfolio
as at 31 March 2025 in accordance with the Appraisal and Valuation Standards published
by the Royal Institution of Chartered Surveyors (“RICS”). Savills and KF have recent
experience in the relevant locations and categories of the property being valued.
Investment property has been valued using the investment method which involves applying
a yield to rental income streams. Inputs include yield, current rent and ERV. For the
year end valuation, the following inputs were used:
Weighted
Valuation Weighted
average passing Topped-up NIY
31 March 2025 rent average ERV Equivalent
Sector range yield
£000 (£ per sq ft)
(£ per sq ft)
Industrial 298.3 6.1 4.75 – 14.9 6.9% 5.5%
Retail warehouse 127.3 11.6 6.1 – 22.4 7.6% 7.5%
Other 78.2 11.3 2.7 – 80.0* 8.4% 7.7%
Office 57.7 16.8 8.5 – 38.0 11.1% 8.1%
High street 32.9 19.3 3.7 – 67.0 8.4% 9.4%
retail
*Drive-through restaurants’ ERV per sq ft are based on building floor area rather than
area inclusive of drive-through lanes.
Valuation reports are based on both information provided by the Company eg current rents
and lease terms, which are derived from the Company’s financial and property management
systems and are subject to the Company’s overall control environment, and assumptions
applied by the valuers eg ERVs, expected capital expenditure and yields. These
assumptions are based on market observation and the valuers’ professional judgement. In
estimating the fair value of each property, the highest and best use of the properties
is their current use.
All other factors being equal, a higher equivalent yield would lead to a decrease in the
valuation of investment property, and an increase in the current or estimated future
rental stream would have the effect of increasing capital value, and vice versa. There
are interrelationships between unobservable inputs which are partially determined by
market conditions, which could impact on these changes, but the table below presents the
sensitivity of the investment property valuations to changes in the most significant
assumptions underlying their valuation, being equivalent yield and ERV. The Board
believes these are reasonable sensitivities given historical changes.
Group and Company
Year Year
ended ended
31 March 31 March
2025 2024
£000 £000
Increase in equivalent yield of 0.25% 34,941 21,627
Decrease in equivalent yield of 0.25% (30,975) (20,134)
Increase of 5% in ERV 1,864 1,807
Decrease of 5% in ERV (1,834) (1,754)
11. Property, plant and equipment
PV cells EV chargers Total
Group and Company £000 £000 £000
Cost/valuation
At 31 March 2024 2,076 1,126 3,202
Additions 1,326 - 1,326
Valuation increase net of depreciation eliminated on 406 - 406
revaluation
At 31 March 2025 3,808 1,126 4,934
Depreciation
At 31 March 2024 (123) (122) (245)
Depreciation (185) (100) (285)
Eliminated on revaluation 308 (1) 307
Accumulated at 31 March 2025 - (223) (223)
Net book value at 31 March 2025 3,808 903 4,711
PV cells EV chargers Total
Group and Company £000 £000 £000
Cost
At 31 March 2023 - - -
Additions 2,076 1,126 3,202
At 31 March 2024 2,076 1,126 3,202
Depreciation
At 31 March 2023 - - -
Depreciation (123) (122) (245)
Accumulated at 31 March 2024 (123) (122) (245)
Net book value at 31 March 2024 1,953 1,004 2,957
12. Investments
Shares in subsidiaries
Company
31 31
Country of registration and Principal Ordinary March March
incorporation activity shares held 2025 2024
Company
number £000 £000
Name
Custodian 08882372 England and Wales Non-trading 100% - -
REIT Limited
- -
The Company’s non-trading UK subsidiary has claimed the audit exemption available under
Section 480 of the Companies Act 2006. The Company’s registered office is also the
registered office of each UK subsidiary.
13. Trade and other receivables
31 March 31 March
Group and Company 2025 2024
£000 £000
Falling due in less than one year:
Trade receivables before expected credit loss provision 4,387 1,911
Expected credit loss provision (627) (855)
3,760 1,056
Other receivables 1,146 2,081
Prepayments and accrued income 295 193
5,201 3,330
The Company regularly monitors the effectiveness of the criteria used to identify
whether there has been a significant increase in credit risk, for example a
deterioration in a tenant’s or sector’s outlook or rent payment performance, and revises
them as appropriate to ensure that the criteria are capable of identifying significant
increases in credit risk before amounts become past due.
Tenant rent deposits of £1.6m (2024: £1.7m) are held as collateral against certain trade
receivable balances.
The Company considers the following as constituting an event of default for internal
credit risk management purposes as historical experience indicates that financial assets
that meet either of the following criteria are generally not recoverable:
• When there is a breach of financial covenants by the debtor; or
• Available information indicates the debtor is unlikely to pay its creditors.
Such balances are provided for in full. For remaining balances the Company has applied
an expected credit loss (“ECL”) matrix based on its experience of collecting rent
arrears. The majority of tenants are invoiced for rental income quarterly in advance
and are issued with invoices before the relevant quarter starts. Invoices become due on
the first day of the rent quarter and are considered past due if payment is not received
by this date. Other receivables are considered past due when the given terms of credit
expire.
Group and Company 31 March 31 March
2025 2024
Expected credit loss provision £000 £000
Opening balance 855 1,143
Increase/(decrease) in provision relating to trade receivables 196 (241)
that are credit-impaired
Utilisation of provisions (424) (47)
Closing balance 627 855
The ageing of receivables considered credit impaired is as follows:
Group and Company 31 March 31 March
2025 2024
£000 £000
0 to 3 months 106 288
3 – 6 months 40 -
Over 6 months 551 567
Closing balance 697 855
14. Trade and other payables
31 March
31 March 2025
Group and Company 2024
£000
£000
Falling due in less than one year:
Trade and other payables 2,603 1,442
Social security and other taxes 760 830
Accruals 3,601 4,079
Rental deposits 65 1,732
7,029 8,083
Falling due in more than one year:
Rental deposits 1,521 -
Other creditors 566 569
2,151 569
The Directors consider that the carrying amount of trade and other payables approximates
to their fair value. Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. For most suppliers interest is
charged if payment is not made within the required terms. Thereafter, interest is
chargeable on the outstanding balances at various rates. The Company has financial risk
management policies in place to ensure that all payables are paid within the credit
timescale. The ageing of rental deposits has been reassessed in the year to align with
underlying lease agreements.
15. Cash and cash equivalents
Group and Company
31 March 31 March
2025 2024
£000 £000
Cash and cash equivalents 10,118 9,714
Cash and cash equivalents at 31 March 2025 include £2.2m (2024: £2.5m) of restricted
cash comprising: £1.6m (2024: £1.7m) rental deposits held on behalf of tenants, £0.6m
(2024: £0.6m) retentions held in respect of development fundings and £nil (2024: £0.2m)
disposal deposit.
16. Borrowings
The table below sets out changes in liabilities arising from financing activities during
the year.
Costs incurred in the
Group and Company arrangement of borrowings
Borrowings £000 Total
£000
Falling due within one year: £000
At 31 March 2023 - - -
Repayment of borrowings - - -
Amortisation of arrangement fees - - -
At 31 March 2024 - - -
Reclassification 20,000 (11) 19,989
Repayment of borrowings - - -
Amortisation of arrangement fees - - -
At 31 March 2025 20,000 (11) 19,989
Falling due in more than one year:
At 31 March 2023 173,500 (1,398) 172,102
Additional borrowings 5,500 - 5,500
Arrangement fees incurred - (744) (744)
Amortisation of arrangement fees - 432 432
At 31 March 2024 179,000 (1,710) 177,290
Reclassification (20,000) 11 (19,989)
Repayment of borrowings (4,000) - (4,000)
Arrangement fees incurred - (78) (78)
Amortisation of arrangement fees - 418 418
At 31 March 2025 155,000 (1,359) 153,641
On 23 January 2025, the Company and Lloyds agreed to extend the term of the RCF by one
year to expire on 10 November 2027. An option remains in place to extend the term by a
further year to 2028, subject to Lloyds’ consent.
At the year end the Company had the following facilities available:
• A £50m RCF with Lloyds with interest of between 1.62% and 1.92% above SONIA and is
repayable on 10 November 2027. The RCF limit can be increased to £75m with Lloyds’
consent, with £39m drawn at the year end. Since the year end, the RCF limit has
been increased to £60m;
• 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 £75m term loan facility with Aviva comprising:
• A £35m tranche repayable on 6 April 2032, with fixed annual interest of 3.02%;
• A £15m tranche repayable on 3 November 2032 with fixed annual interest of 3.26%; and
• A £25m tranche repayable on 3 November 2032 with fixed annual interest of 4.10%.
Each facility has a discrete security pool, comprising a number of the Company’s
individual properties, over which the relevant lender has security and covenants:
• The maximum LTV of each discrete security pool is either 45% and 50%, with an
overarching covenant on the Company’s property portfolio of a maximum of either 35%
or 40% LTV; and
• Historical interest cover, requiring net rental income from each discrete security
pool, over the preceding three months, to exceed either 200% or 250% of the
facility’s quarterly interest liability.
The Company’s debt facilities contain market-standard cross-guarantees such that a
default on an individual facility will result in all facilities falling into default.
17. Share capital
Group and Company
Ordinary shares
of 1p
Issued and fully paid share capital £000
At 1 April 2023, 31 March 2024 and 31 March 2025 440,850,398 4,409
Rights, preferences and restrictions on shares
All ordinary shares carry equal rights and no privileges are attached to any shares in
the Company. All the shares are freely transferable, except as otherwise provided by
law. The holders of ordinary shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share at meetings of the Company. All
shares rank equally with regard to the Company’s residual assets.
At the AGM of the Company held on 8 August 2024, the Board was given authority to issue
up to 146,950,133 shares, pursuant to section 551 of the Companies Act 2006 (“the
Authority”). The Authority is intended to satisfy market demand for the ordinary shares
and raise further monies for investment in accordance with the Company’s investment
policy. The Authority expires on the earlier of 15 months from 8 August 2024 and the
subsequent AGM, due to take place on 9 September 2025. Since 8 August 2024, 22.9m
ordinary shares have been issued in connection with the acquisition of Merlin.
In addition, the Company was granted authority to make market purchases of up to
44,085,039 ordinary shares under section 701 of the Companies Act 2006. No market
purchases of ordinary shares have been made.
Group and Company
Retained
earnings Revaluation reserve Share premium Merger
account £000 reserve
Other reserves £000 £000
£000
At 1 April 2023 163,259 - 250,970 18,931
Loss for the year (1,502) - - -
Dividends paid (24,247) - - -
At 31 March 2024 137,510 - 250,970 18,931
Revaluation of PPE - 714 - -
Profit for the year 38,155 - -
Dividends paid (27,223) - -
At 31 March 2025 148,442 714 250,970 18,931
The nature and purpose of each reserve within equity are:
• Share premium - amounts subscribed for share capital in excess of nominal value less
any associated issue costs that have been capitalised.
• Revaluation reserve - the unrealised fair value of PV assets in excess of their
historical cost less accumulated depreciation.
• Retained earnings - all other net gains and losses and transactions with owners (eg
dividends) not recognised elsewhere.
• Merger reserve - a non-statutory reserve that is credited instead of a company's
share premium account in circumstances where merger relief under section 612 of the
Companies Act 2006 is obtained.
18. Commitments and contingencies
Company as lessor
Operating leases, in which the Company is the lessor, relate to investment property
owned by the Company with lease terms of between 0 and 21 years. The aggregated future
minimum rentals receivable under all non-cancellable operating leases are:
31 March 31 March
2025 2024
Group and Company £000 £000
Not later than one year 38,406 39,751
Year 2 35,206 34,984
Year 3 29,810 31,620
Year 4 24,353 26,113
Year 5 19,380 19,946
Later than five years 77,434 74,059
224,589 226,473
The following table presents rent amounts reported in revenue:
31 March 31 March
Group and Company 2025 2024
£000 £000
Lease income on operating leases 42,587 41,926
Therein lease income relating to variable lease payments that do 241 268
not depend on an index or rate
42,828 42,194
19. Related party transactions
Save for transactions described below, the Company is not a party to, nor had any
interest in, any other related party transaction during the year.
Transactions with directors
Each of the directors is engaged under a letter of appointment with the Company and does
not have a service contract with the Company. During the year, the terms of the
Directors’ appointments were amended such that each director is required to retire by
rotation and seek re-election annually (2024: at least every three years). Each
director’s appointment under their respective letter of appointment is terminable
immediately by either party (the Company or the director) giving written notice and no
compensation or benefits are payable upon termination of office as a director of the
Company becoming effective.
Nathan Imlach is Chief Strategic Adviser of Mattioli Woods, the parent company of the
Investment Manager. As a result, Nathan Imlach is not independent. The Company
Secretary, Ed Moore, is also a director of the Investment Manager.
Compensation paid to the directors, who are also considered ‘key management personnel’
in addition to the key Investment Manager personnel, is disclosed in the Remuneration
report. The directors' remuneration report also satisfies the disclosure requirements
of paragraph 1 of Schedule 5 to the Accounting Regulations.
Project Merlin
Since the year end the Company has acquired Merlin and as part of this transaction the
Company is due to pay Mattioli Woods an introducer’s fee of £0.2m and Custodian Capital
a transaction fee of £0.06m. The vendors of Merlin are advised clients of Mattioli
Woods.
Investment Management Agreement
The Investment Manager is engaged as AIFM under an IMA with responsibility for the
management of the Company’s assets, subject to the overall supervision of the
Directors. The Investment Manager manages the Company’s investments in accordance with
the policies laid down by the Board and the investment restrictions referred to in the
IMA. The Investment Manager also provides day-to-day administration of the Company and
acts as secretary to the Company, including maintenance of accounting records and
preparing the annual and interim financial statements of the Company.
Annual management fees payable to the Investment Manager under the IMA are:
• 0.9% of the NAV of the Company as at the relevant quarter day which is less than or
equal to £200m divided by 4;
• 0.75% of the NAV of the Company as at the relevant quarter day which is in excess of
£200m but below £500m divided by 4;
• 0.65% of the NAV of the Company as at the relevant quarter day which is in excess of
£500m but below £750m divided by 4; plus
• 0.55% of the NAV of the Company as at the relevant quarter day which is in excess of
£750m divided by 4.
Administrative fees payable to the Investment Manager under the IMA are:
• 0.125% of the NAV of the Company as at the relevant quarter day which is less than
or equal to £200m divided by 4;
• 0.115% of the NAV of the Company as at the relevant quarter day which is in excess
of £200m but below £500m divided by 4;
• 0.02% of the NAV of the Company as at the relevant quarter day which is in excess of
£500m but below £750m divided by 4; plus
• 0.015% of the NAV of the Company as at the relevant quarter day which is in excess
of £750m divided by 4.
The IMA is terminable by either party by giving not less than 12 months’ prior written
notice to the other. The IMA may also be terminated on the occurrence of an insolvency
event in relation to either party, if the Investment Manager is fraudulent, grossly
negligent or commits a material breach which, if capable of remedy, is not remedied
within three months, or on a force majeure event continuing for more than 90 days.
The Investment Manager receives a marketing fee of 0.25% (2024: 0.25%) of the aggregate
gross proceeds from any issue of new shares in consideration of the marketing services
it provides to the Company.
During the year the Investment Manager charged the Company £3.9m (2024: £4.0m)
comprising £3.4m (2024: £3.5m) in respect of annual management fees and £0.5m (2024:
£0.5m) in respect of administrative fees.
During the year the Company appointed Maven, a subsidiary of Mattioli Woods, as Company
Secretarial Adviser, which charges the Company an annual fee of £0.02m for Company
Secretarial Services.
Mattioli Woods arranges insurance on behalf of the Company’s tenants through an
insurance broker and the Investment Manager is paid a commission by the Company’s
tenants for administering the policy.
On 4 September 2024 100% of the share capital of Mattioli Woods was acquired Tiger Bidco
Limited, a wholly-owned subsidiary of vehicles advised and managed by Pollen
Street Capital Limited.
20. Financial risk management
Capital risk management
The Company manages its capital to ensure it can continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity
balance within the parameters of its investment policy. The capital structure of the
Company consists of debt, which includes the borrowings disclosed below, cash and cash
equivalents and equity attributable to equity holders of the parent, comprising issued
ordinary share capital, share premium and retained earnings.
Net gearing
The Board reviews the capital structure of the Company on a regular basis. As part of
this review, the Board considers the cost of capital and the risks associated with it.
The Company has a medium-term target net gearing ratio of 25% determined as the
proportion of debt (net of unrestricted cash) to its property. The net gearing ratio at
the year-end was 27.9% (2024: 29.2%).
Externally imposed capital requirements
The Company is not subject to externally imposed capital requirements, although there
are restrictions on the level of interest that can be paid due to conditions imposed on
REITs.
Financial risk management
The Company seeks to minimise the effects of interest rate risk, credit risk, liquidity
risk and cash flow risk by using fixed and floating rate debt instruments with varying
maturity profiles, at low levels of net gearing.
Interest rate risk management
The Company’s activities expose it primarily to the financial risks of increases in
interest rates, as it borrows funds at floating interest rates. The risk is managed by
maintaining:
• An appropriate balance between fixed and floating rate borrowings;
• A low level of net gearing; and
• An RCF whose flexibility allows the Company to manage the risk of changes in
interest rates by paying down variable borrowings using the proceeds of equity
issuance, property sales or arranging fixed-rate debt.
The Board periodically considers the availability and cost of hedging instruments to
assess whether their use is appropriate and also considers the maturity profile of the
Company’s borrowings.
Interest rate sensitivity analysis
Interest rate risk arises on interest payable on the RCF only, as interest on all other
debt facilities is payable on a fixed rate basis. At 31 March 2025, the RCF was drawn
at £35m (2024: £39m). Assuming this amount was outstanding for the whole year and based
on the exposure to interest rates at the reporting date, if SONIA had been 1.0%
higher/lower and all other variables were constant, the Company’s profit for the year
ended 31 March 2025 would decrease/increase by £0.4m (2024: £0.4m).
Market risk management
The Company manages its exposure to market risk by holding a portfolio of investment
property diversified by sector, location and tenant.
Market risk sensitivity
Market risk arises on the valuation of the Company’s property portfolio in complying
with its bank loan covenants (Note 16). The valuation of the Company’s property
portfolio would have to fall by 20% (2024: 17%) for the Company to breach its overall
borrowing covenant.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual
obligations resulting in a financial loss to the Company. The Company’s credit risk is
primarily attributable to its trade receivables and cash balances. The amounts included
in the statement of financial position are net of allowances for bad and doubtful
debts. An allowance for impairment is made where a debtor is in breach of its financial
covenants, available information indicates a debtor can’t pay or where balances are
significantly past due.
The Company has adopted a policy of only dealing with creditworthy counterparties as a
means of mitigating the risk of financial loss from defaults. The maximum credit risk
on financial assets at 31 March 2025, which comprise trade receivables plus unrestricted
cash, was £11.7m (2024: £8.3m).
The Company has no significant concentration of credit risk, with exposure spread over a
large number of tenants covering a wide variety of business types. Further detail on
the Company’s credit risk management process is included within the Strategic report.
Cash of £10.1m (2024: £9.7m) is held with Lloyds Bank plc which has a credit rating of
A1 33 28 .
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board, which has
built an appropriate liquidity risk management framework for the management of the
Company’s short, medium and long-term funding and liquidity management requirements.
The Company manages liquidity risk by maintaining adequate reserves, banking facilities
and reserve borrowing facilities, by continuously monitoring forecast and actual cash
flows and matching the maturity profile of financial assets and liabilities.
The following tables detail the Company’s contractual maturity for its financial
liabilities. The table has been drawn up based on undiscounted cash flows of financial
liabilities based on the earliest date on which the Company can be required to pay.
The table includes both interest and principal cash flows.
31 March
31 March 31 March 2025 2025
2025 3 months – 1 31 March
Group and Company Interest rate % 0-3 months year 2025 5 years +
1-5 years
£000 £000 £000
£000
Trade and other N/a 7,790 - 151 416
payables
Borrowings:
Variable rate 6.080 532 1,596 42,696 -
Fixed rate 3.935 197 20,295 - -
Fixed rate 2.987 336 1,008 47,939 -
Fixed rate 3.020 264 793 4,228 37,134
Fixed rate 3.260 122 367 1,956 16,271
Fixed rate 4.100 154 461 2,460 26,599
9,395 24,520 99,430 80,420
31 March
31 March 31 March 2024 2024
2024 3 months – 1 31 March
Group and Company Interest rate % 0-3 months year 2024 5 years +
1-5 years
£000 £000 £000
£000
Trade and other N/a 5,922 - 151 420
payables
Borrowings:
Variable rate 6.9 673 2,018 46,041 -
Fixed rate 3.935 197 590 20,295 -
Fixed rate 2.987 336 1,008 49,283 -
Fixed rate 3.020 264 793 4,228 38,191
Fixed rate 3.260 122 367 1,956 16,760
Fixed rate 4.100 154 461 2,460 27,214
7,668 5,237 124,414 82,585
Fair values
The fair values of financial assets and liabilities are not materially different from
their carrying values in the financial statements. The fair value hierarchy levels are
as follows:
• Level 1 – quoted prices (unadjusted) in active markets for identical assets and
liabilities;
• Level 2 – inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
• Level 3 – inputs for the assets or liabilities that are not based on observable
market data (unobservable inputs).
There have been no transfers between Levels 1, 2 and 3 during the year. The main
methods and assumptions used in estimating the fair values of financial instruments and
investment property are detailed below.
Investment property and assets held-for-sale – level 3
Fair value of PV is based on valuations provided by independent firms of valuers, which
use the inputs set out in Note 10. These values were determined after having taken into
consideration recent market transactions for similar properties in similar locations to
the investment properties held by the Company. The fair value hierarchy of investment
property is level 3. At 31 March 2024, the fair value of the Company’s investment
properties and assets held-for-sale was £594.4m (2024: £589.1m).
PV – level 3
Fair value is based on valuations provided by independent firms of chartered surveyors
and registered appraisers, which use the inputs set out in Note 11. These values were
determined after having taken into consideration an appropriate yield and the net income
from each array. The fair value hierarchy of PV is level 3. At 31 March 2025, the fair
value of the Company’s PV was £3.8m (2024: £2.0m).
Interest bearing loans and borrowings – level 3
At 31 March 2025 the gross value of the Company’s loans with Lloyds, SWIP and Aviva all
held at amortised cost was £175.0m (2024: £179.0m). The difference between the carrying
value of Company’s loans and their fair value is detailed in Note 22.
Trade and other receivables/payables – level 3
The carrying amount of all receivables and payables deemed to be due within one year are
considered to reflect their fair value.
21. Events after the reporting date
Dividends
On Friday 30 May 2025 the Company paid a fourth quarterly interim dividend per share of
1.5p.
Property disposals
Since the year end the Company has sold:
• Part-let offices in Cheadle for £4.0m; and
• Fully-let offices in Cheadle for £2.9m.
Acquisitions
On 30 May 2025 the Company completed the corporate acquisition of Merlin Properties
Limited for initial consideration of 22.9m new ordinary shares in the Company. Based on
the nature of the acquisition it does not fall within the scope of IFRS 3 Business
Combinations and the assets acquired were purchased at fair value. The transaction was
financed by way of a share for share exchange.
22. Alternative performance measures
NAV per share total return
An alternative measure of performance taking into account both capital returns and
dividends by assuming dividends declared are reinvested at NAV at the time the shares
are quoted 34 ex-dividend, shown as a percentage change from the start of the year.
Year ended Year ended
31 March 31 March
2025 2024
Group Calculation
Net assets (£000) 423,466 411,820
Shares in issue at 31 March (thousands) 440,850 440,850
NAV per share at the start of the year (p) A 93.4 99.3
Dividends per share paid during the year (p) B 6.175 5.5
NAV per share at the end of the year (p) C 96.1 93.4
9.5% (0.4%)
NAV per share total return (C-A+B)/A
Share price total return
An alternative measure of performance taking into account both share price returns and
dividends by assuming 35 dividends declared are reinvested at the ex-dividend share
price, shown as a percentage change from the start of the year.
Year ended Year ended
31 March 31 March
2025 2024
Group Calculation
Share price at the start of the year (p) A 81.4 89.2
Dividends per share paid during the year (p) B 6.175 5.5
Share price at the end of the year (p) C 76.2 81.4
1.2% (2.6%)
Share price total return (C-A+B)/A
Dividend cover
The extent to which dividends relating to the year are supported by recurring net
income.
Year ended Year ended
31 March 31 March
2025 2024
Group £000 £000
Dividends paid relating to the year 19,838 18,185
Dividends approved relating to the year 6,613 7,384
Dividends relating to the year 26,451 25,569
Profit/(loss) after tax 38,155 (1,502)
One-off costs - 1,557
Net (gains)/losses on investment property and depreciation
(11,369) 25,687
Recurring net income 26,786 25,742
Dividend cover 101.3% 100.7%
Weighted average cost of debt
The interest rate payable on bank borrowings at the year end weighted by the amount of
borrowings at that rate as a proportion of total borrowings.
Amount drawn
31 March 2025
£m Interest rate
Weighting
RCF 35.0 6.080% 1.22%
Total variable rate 35.0
SWIP £20m loan 20.0 3.935% 0.77%
SWIP £45m loan 45.0 2.987% 0.45%
Aviva
• £35m tranche 35.0 3.020% 0.60%
• £15m tranche 15.0 3.260% 0.28%
• £25m tranche 25.0 4.100% 0.59%
Total fixed rate 140.0
Weighted average drawn facilities 175.0 3.91%
Amount drawn
31 March 2024
£m Interest rate
Weighting
RCF 39.0 6.900% 1.50%
Total variable rate 39.0
SWIP £20m loan 20.0 3.935% 0.44%
SWIP £45m loan 45.0 2.987% 0.75%
Aviva
£35m tranche 35.0 3.020% 0.59%
• £15m tranche 15.0 3.260% 0.27%
• £25m tranche 25.0 4.100% 0.57%
Total fixed rate 140.0
Weighted average rate on drawn facilities 179.0 4.13%
Net gearing
Gross borrowings less cash (excluding restricted cash), divided by portfolio 36 29
value. This ratio indicates whether the Company is meeting its investment objectives to
target 25% loan-to-value in the medium-term with a maximum permitted level of 35%, to
balance enhancing shareholder returns without facing excessive financial risk.
Year ended Year ended
31 March 31 March
2025 2024
Group £000 £000
Gross borrowings 175,000 179,000
Cash (10,118) (9,714)
Restricted cash 2,188 2,502
Net borrowings 167,070 171,788
Investment property 594,364 589,122
PV 3,808 -*
598,172 589,122
Net gearing 27.9% 29.2%
*PV was not included in the net gearing calculation in the prior year.
Ongoing charges
A measure of the regular, recurring costs of running an investment company expressed as
a percentage of average NAV, and indicates how effectively costs are controlled in
comparison to other property investment companies.
Year ended Year ended
31 March 31 March
2025 2024
Group £000 £000
Average quarterly NAV for the year 414,786 423,622
Expenses (excluding depreciation) 13,852 12,586*
Operating expenses of rental property rechargeable to tenants (3,562) (3,280)
Ongoing charges 10,290 9,306
Operating expenses of rental property directly incurred (4,891) (4,032)
One-off costs - -
Ongoing charges excluding direct property expenses 5,399 5,274
OCR 2.48% 2.20%
OCR excluding direct property expenses 1.30% 1.24%
*depreciation was not deducted from total expenses in the prior year calculation.
EPRA performance measures
The Company uses EPRA alternative performance measures based on its Best Practice
Recommendations to supplement IFRS measures, in line with best practice in the sector.
The measures defined by EPRA are designed to enhance transparency and comparability
across the European real estate sector. The Board supports EPRA’s drive to bring parity
to the comparability and quality of information provided in this report to investors and
other key stakeholders. EPRA alternative performance measures are adopted throughout
this report and are considered by the directors to be key business metrics.
EPRA earnings per share
A measure of the Company’s operating results excluding capital gains or losses, giving
an alternative indication of performance compared to basic EPS which sets out the extent
to which dividends relating to the year are supported by recurring net income.
Year ended Year ended
31 March 31 March
2025 2024
£000 £000
Group
Profit/(loss) for the year after taxation 38,155 (1,502)
Net (gains)/losses on investment property and depreciation (11,369) 25,687
Abortive acquisition costs - 1,557
EPRA earnings 26,786 25,742
Weighted average number of shares in issue (thousands) 440,850 440,850
EPRA earnings per share (p) 6.1 5.8
EPRA NAV per share metrics
EPRA NAV metrics make adjustments to the IFRS NAV to provide stakeholders with
additional information on the fair value of the assets and liabilities of a real estate
investment company, under different scenarios.
EPRA Net Reinstatement Value (“NRV”)
NRV assumes the Company never sells its assets and aims to represent the value required
to rebuild the entity.
31 March 31 March
2025 2024
Group £000 £000
IFRS NAV 423,466 411,820
Fair value of financial instruments - -
Deferred tax - -
EPRA NRV 423,466 411,820
440,850 440,850
Number of shares in issue (thousands)
EPRA NRV per share (p) 96.1 93.4
EPRA Net Tangible Assets (“NTA”)
Assumes that the Company buys and sells assets for short-term capital gains, thereby
crystallising certain deferred tax balances.
31 March 31 March
2025 2024
Group £000 £000
IFRS NAV 423,466 411,820
Fair value of financial instruments - -
Deferred tax - -
Intangibles - -
EPRA NTA 423,466 411,820
440,850 440,850
Number of shares in issue (thousands)
EPRA NTA per share (p) 96.1 93.4
EPRA Net Disposal Value (“NDV”)
Represents the shareholders’ value under a disposal scenario, where deferred tax,
financial instruments and certain other adjustments are calculated to the full extent of
their liability, net of any resulting tax.
31 March 31 March
2025 2024
Group £000 £000
IFRS NAV 423,466 411,820
Fair value of fixed rate debt below book value 16,754 16,926
Deferred tax - -
EPRA NDV 440,220 428,746
440,850 440,850
Number of shares in issue (thousands)
EPRA NDV per share (p) 99.9 97.3
At 31 March 2025 the Company’s gross debt included in the balance sheet at amortised
cost was £175.0m (2024: £179.0m) and its fair value is considered to be £158.2m (2024:
£160.4m). This fair value has been calculated based on prevailing mark-to-market
valuations provided by the Company’s lenders, and excludes ‘break’ costs chargeable
should the Company settle loans ahead of their contractual expiry.
EPRA NIY and EPRA ‘topped-up’ NIY
EPRA NIY represents annualised rental income based on cash rents passing at the balance
sheet date, less non-recoverable property operating expenses, divided by the property
valuation plus estimated purchaser’s costs. The EPRA ‘topped-up’ NIY is calculated by
making an adjustment to the EPRA NIY in respect of the expiration of rent free periods
(or other unexpired lease incentives such as discounted rent periods and stepped
rents). These measures offer comparability between the rent generating capacity of
portfolios.
31 March 31 March
2025 2024
Group £000 £000
Investment property 37 30 594,364 589,122
Allowance for estimated purchasers’ costs 38 31 38,634 38,293
Gross-up property portfolio valuation 632,998 627,415
Annualised cash passing rental income 39 32 41,135 41,732
Property outgoings 40 33 (2,122) (1,931)
Annualised net rental income 39,013 39,801
Impact of expiry of current lease incentives 41 34 2,780 1,408
Annualised net rental income on expiry of lease incentives 41,793 41,209
EPRA NIY 6.2% 6.3%
EPRA ‘topped-up’ NIY 6.6% 6.6%
EPRA vacancy rate
EPRA vacancy rate is the ERV of vacant space as a percentage of the ERV of the whole
property portfolio and offers insight into the additional rent generating capacity of
the portfolio.
31 March 31 March
2025 2024
Group £000 £000
Annualised potential rental value of vacant premises 4,467 4,743
Annualised potential rental value for the property portfolio 50,194 48,976
EPRA vacancy rate 8.9% 9.7%
EPRA cost ratios
EPRA cost ratios reflect overheads and operating costs as a percentage of gross rental
income and indicate how effectively costs are controlled in comparison to other property
investment companies.
Year ended Year ended
31 March 31 March
2025 2024
Group £000 £000
Directly incurred operating expenses and other expenses, excluding 10,290 9,306*
depreciation
Ground rent costs (38) (38)
EPRA costs (including direct vacancy costs) 10,252 9,268
Property void costs (1,806) (1,807)
EPRA costs (excluding direct vacancy costs) 8,446 7,461
Gross rental income 42,828 42,194
Ground rent costs (38) (38)
Rental income net of ground rent costs 42,790 42,156
EPRA cost ratio (including direct vacancy costs) 24.0% 22.0%
19.7% 17.7%
EPRA cost ratio (excluding direct vacancy costs)
*depreciation was not deducted from total expenses in the prior year calculation.
EPRA LTV
An alternative measure of gearing including all payables and receivables. This ratio
indicates whether the Company is complying with its investment objective to target 25%
loan-to-value in the medium-term to balance enhancing shareholder returns without facing
excessive financial risk.
Year ended Year ended
31 March 31 March
2025 2024
Group £000 £000
Gross borrowings 175,000 179,000
Trade and other receivables 5,201 3,330
Trade and other payables (8,550) (8,083)
Deferred income (8,181) (7,361)
Cash 10,118 9,714
Restricted cash (2,188) (2,502)
Net borrowings 171,400 174,098
Investment property and PV 598,172 589,122
EPRA LTV 28.7% 29.6%
EPRA capital expenditure
Capital expenditure incurred on the Company’s property portfolio during the year. This
ratio offers insight into the proportion of cash deployment relating to acquisitions
compared to the like-for-like portfolio.
31 March 31 March
2025 2024
Group £000 £000
Acquisitions - -
Development 4,843 3,567
Like-for-like portfolio 2,000 13,467
Total capital expenditure 6,843 17,034
EPRA like-for-like annual rent
Like-for-like rental growth of the property portfolio by sector which offers an
alternative view on the ‘run-rate’ of revenues at the year end.
31 March 2025
Retail warehouse
Industrial Retail Other Office Total
£000
Group £000 £000 £000 £000 £000
Like-for-like rent 17,688 9,711 3,270 6,310 5,351 42,330
Acquired properties - - - - - -
Sold properties 390 - - - 108 498
18,078 9,711 3,270 6,310 5,459 42,828
31 March 2024
Retail warehouse
Industrial Retail Other Office Total
£000
Group £000 £000 £000 £000 £000
Like-for-like rent 16,357 3,679 9,785 5,807 5,415 41,043
Acquired properties - - - - - -
Sold properties 918 14 - 28 191 1,151
17,275 3,693 9,785 5,835 5,606 42,194
Investment policy
The Company's investment objective is to provide Shareholders with an attractive level
of income together with the potential for capital growth from investing in a diversified
portfolio of commercial real estate properties in the UK.
The Company's investment policy is:
a. To invest in a diversified portfolio of UK commercial real estate principally
characterised by smaller, regional, core/core-plus properties that provide enhanced
income returns. Core real estate generally offers the lowest risk and target
returns, requiring little asset management and fully let on long leases. Core-plus
real estate generally offers low to moderate risk and target returns, typically
high-quality and well-occupied properties but also providing asset management
opportunities.
b. The property portfolio should not exceed a maximum weighting to any one property
sector, or to any geographic region, of greater than 50%.
c. To focus on areas with high residual values, strong local economies and an imbalance
between supply and demand. Within these locations the objective is to acquire modern
buildings or those that are considered fit for purpose by occupiers.
d. No one tenant or property should account for more than 10% of the total rent roll of
the Company's portfolio at the time of purchase, except:
i. in the case of a single tenant which is a governmental body or department for which
no percentage limit to proportion of the total rent roll shall apply; or
ii. in the case of a single tenant rated by Dun & Bradstreet with a credit risk score
higher than 2, in which case the exposure to such single tenant may not exceed 5% of
the total rent roll (a risk score of 2 represents “lower than average risk”).
e. The Company will not undertake speculative development (that is, development of
property which has not been leased or pre-leased), save for redevelopment and
refurbishment of existing holdings, but may invest in forward funding agreements or
forward commitments (these being, arrangements by which the Company may acquire
pre-development land under a structure designed to provide the Company with
investment rather than development risk) of pre-let developments where the Company
intends to own the completed development. Substantial redevelopments and
refurbishments of existing properties which expose the Company to development risk
would not exceed 10% of the Company’s gross assets.
f. For the avoidance of doubt, the Company is committed to seeking further growth in
the Company, which may involve strategic property portfolio acquisitions and
corporate consolidation, such transactions potentially including public and private
companies, holding companies and special purpose vehicles.
g. The Company may use gearing, including to fund the acquisition of property and cash
flow requirements, provided that the maximum gearing shall not exceed 35% of the
aggregate market value of all the properties of the Company at the time of
borrowing. Over the medium-term the Company is expected to target borrowings of 25%
of the aggregate market value of all the properties of the Company at the time of
borrowing.
h. The Company reserves the right to use efficient portfolio management techniques,
such as interest rate hedging and credit default swaps, to mitigate market
volatility.
i. Uninvested cash or surplus capital or assets may be invested on a temporary basis
in:
(i) cash or cash equivalents, money market instruments, bonds, commercial paper or other
debt obligations with banks or other counterparties having a single-A (or equivalent) or
higher credit rating as determined by an internationally recognised rating agency; or
(ii) any "government and public securities" as defined for the purposes of the FCA
rules.
j. Gearing, calculated as borrowings as a percentage of the aggregate market value of
all the properties of the Company and its subsidiaries, may not exceed 35% at the
time such borrowings are incurred.
Glossary of terms
Explanation
Term
The AIC Code addresses the Principles and Provisions
set out in the UK Corporate Governance Code, as well as
2019 AIC Corporate Governance setting out additional provisions on issues that are of
Code for Investment Companies specific relevance to the Company and provide more
(AIC Code) relevant information to shareholders.
External investment manager with appropriate FCA
Alternative Investment Fund permissions to manage an ‘alternative investment fund’
Manager (AIFM)
Alternative performance measures
(APMs) Assess Company performance alongside IFRS measures
Building Research Establishment
Environmental Assessment Method A set of assessment methods and tools designed to help
(BREEAM) understand and mitigate the environmental impacts of
developments
A project focused on carbon risk assessment for the
European real estate industry’s push to decarbonise,
building a methodology to empirically quantify the
different scenarios and their impact on the investor
portfolios and identify which properties will be at
Carbon Risk Real Estate Monitor risk of stranding due to the expected increase in the
(CRREM) stringent building codes, regulation, and carbon
prices. It also enables an analysis of the effects of
refurbishing single properties on the total carbon
performance of a company
Generally understood to offer the lowest risk and
Core real estate target returns, requiring little asset management and
fully let on long leases.
Generally understood to offer low-to-moderate risk and
Core-plus real estate target returns, typically high-quality and
well-occupied properties but also providing asset
management opportunities.
EPRA earnings divided by dividends paid and approved
Dividend cover for the year
Earnings per share (EPS)
Net profit/(loss) divided by number of shares in issue
Required certificate whenever a property is built, sold
or rented. An EPC gives a property an energy efficiency
rating from A (most efficient) to G (least efficient).
Energy performance certificate An EPC contains information about a property’s energy
(EPC) use and typical energy costs, and recommendations about
how to reduce energy use and save money
Profit after tax, excluding net loss on property
portfolio, divided by weighted average number of shares
EPRA earnings per share in issue
ERV of occupied space as a percentage of the ERV of the
EPRA occupancy whole property portfolio
EPRA BPR and sBPR facilitate comparison with the
Company’s peers through consistent reporting of key
EPRA (Sustainability) Best real estate specific and environmental performance
Practice Recommendations (BPR), measures
(sBPR)
Annualised cash rents at the year-end date, adjusted
for the expiration of lease incentives (rent free
periods or other lease incentives such as discounted
rent periods and stepped rents), less non-recoverable
EPRA topped-up net initial yield vacant property operating expenses and ground rent
costs, divided by property valuation plus estimated
purchaser’s costs
The external valuers’ opinion of the open market rent
which, on the date of valuation, could reasonably be
Estimated rental value (ERV) expected to be obtained on a new letting or rent review
of a property
Weighted average of annualised cash rents at the
year-end date and ERV, less estimated non-recoverable
Equivalent yield property operating expenses, divided by property
valuation plus estimated purchaser’s costs
Unbiased, probability-weighted amount of doubtful debt
provision, using reasonable and supportable information
Expected credit loss (ECL) that is available without undue cost or effort at the
reporting date
GRESB independently benchmarks ESG data to provide
Global Real Estate financial markets with actionable insights, ESG data
Sustainability Benchmark (GRESB) and benchmarks
Gasses in the earth’s atmosphere which trap heat and
Greenhouse gas (GHG) lead directly to climate change
Tenants with strong credit ratings and financial
Institutional grade tenants stability, with a proven track record which are more
highly sought after by institutional investors
Investment management agreement The Investment Manager is engaged under an IMA to
(IMA) manage the Company’s assets, subject to the overall
supervision of the Directors
Published, FCA approved policy that contains
information about the policies which the Company will
follow relating to asset allocation, risk
Investment policy diversification, and gearing, and that includes maximum
exposures. This is a requirement of Listing Rule 15
The Company’s environmental and performance targets are
measured by KPIs which provide a strategic way to
Key performance indicator (KPI) assess its success towards achieving its objectives
Comparisons adjusted to exclude assets bought or sold
Like-for-like during the current or prior year
Market Abuse Regulation (MAR) Regulations to which the Company’s code for directors’
share dealings is aligned
Minimum Energy Efficiency
Standards (MEES) MEES regulations set a minimum energy efficiency level
for rented properties.
Equity attributable to owners of the Company
Net asset value (NAV)
The movement in EPRA Net Tangible Assets per share plus
the dividend paid during the period expressed as a
NAV per share total return percentage of the EPRA net tangible assets per share at
the beginning of the period
Gross borrowings less cash (excluding restricted cash),
Net gearing / loan-to-value divided by property portfolio and solar panel value
(LTV)
Annualised cash rents at the year-end date, adjusted
for the expiration of lease incentives, divided by
Net initial yield (NIY) property valuation plus estimated purchaser’s costs
Annualised cash rents at the year-end date, adjusted
for the expiration of lease incentives, less estimated
Net rental income non-recoverable property operating expenses including
void costs and net service charge expenses
NAV adjusted to reflect the fair value of trading
properties and derivatives and to exclude deferred
Net tangible assets (NTA) taxation on revaluations
Expenses (excluding operating expenses of rental
property recharged to tenants) divided by average
Ongoing charges ratio (OCR) quarterly NAV, representing the Annual running costs of
the Company
Annualised cash rents at the year-end date, adjusted
Passing rent for the expiration of lease incentives
A property company which qualifies for and has elected
into a tax regime which is exempt from corporation tax
Real Estate Investment Trust on profits from property rental income and UK capital
(REIT) gains on the sale of investment properties
Variable rate loan which can be drawn down or repaid
Revolving credit facility (RCF) periodically during the term of the facility
Expected future increase in rents once reset to market
Reversionary potential rate
Share price movement including dividends paid during
Share price total return the year
Sterling Overnight Index Average
(SONIA) Base rate payable on variable rate bank borrowings
before the bank’s margin
SECR requirements aim to put green credentials into the
Streamlined Energy and Carbon public domain and help organisations achieve the
Report (SECR) benefits of environmental reporting
The total loan interest cost per annum, based on
Weighted average cost of drawn prevailing rates on variable rate debt, divided by the
debt facilities total debt in issue
Weighted average unexpired lease
term to first break or expiry Average unexpired lease term across the investment
(WAULT) portfolio weighted by contracted rent
Distribution of the Annual Report and accounts to members
The financial information set out above does not constitute the Company's statutory
accounts for the years ended 31 March 2025 or 2024, but is derived from those accounts.
Statutory accounts for 2024 have been delivered to the Registrar of Companies and those
for 2025 will be delivered following the Company's AGM. The auditor has reported on the
2025 accounts: their report was unqualified, did not draw attention to any matters by
way of emphasis and did not contain statements under 42 s498(2) or 43 (3) of the
Companies Act 2006. The Annual Report and accounts will be posted to shareholders in
due course, and will be available on our website (custodianreit.com) and for inspection
by the public at the Company’s registered office address: 1 New Walk Place, Leicester
LE1 6RU during normal business hours on any weekday. Further copies will be available
on request.
- Ends -
════════════════════════════════════════════════════════════════════════════════════════
44 1 Comprising unrealised gains on investment property and solar panels (included
within property, plant and equipment).
45 2 Latest external valuation prior to the disposal offer being reflected in
subsequent valuations.
46 3 The European Public Real Estate Association (“EPRA”).
47 4 Profit after tax, excluding depreciation and net revaluation gains on investment
property, divided by weighted average number of shares in issue.
48 5 Profit after tax divided by weighted average number of shares in issue.
49 6 Dividends paid and approved for the year.
50 7 Profit after tax, excluding depreciation and net gains on investment property,
divided by dividends paid and approved for the year.
51 8 Net Asset Value (“NAV”) movement including dividends paid during the year on
shares in issue at 31 March 2024.
52 9 Share price movement including dividends paid during the year.
53 10 EPRA net tangible assets (“NTA”) does not differ from the Company’s IFRS NAV or
EPRA NAV.
54 11 Gross borrowings less cash (excluding restricted cash) divided by investment
property portfolio and solar panel value.
55 12 Expenses (excluding depreciation and operating expenses of rental property
recharged to tenants) divided by average quarterly NAV.
56 13 Expenses (excluding depreciation and operating expenses of rental property)
divided by average quarterly NAV.
57 14 Weighted by floor area. For properties in Scotland, English equivalent EPC
ratings have been obtained.
58 15 A full version of the Company’s Investment Policy is shown in the Investment
Policy section of this Annual Report.
59 16 ‘Core’ real estate is generally understood to offer the lowest risk and target
returns, requiring little asset management and fully let on long leases. Core-plus real
estate is generally understood to offer low-to-moderate risk and target returns,
typically high-quality and well-occupied properties but also providing asset management
opportunities.
60 17 A risk score of two represents “lower than average risk”.
61 18 EPRA topped-up net initial yield.
62 19 Quarterly interim dividends totalling 5.875p per share (1.375p relating to the
prior year and 4.5p relating to the year) were paid on shares in issue throughout the
year.
63 20 Annualised cash rents at the year-end date, adjusted for the expiration of
lease incentives, less estimated non-recoverable property operating expenses (excluding
letting and rent review fees), divided by property valuation plus estimated purchaser’s
costs. Considered an APM.
64 21 Source: Association of Investment Companies.
65 22 Since this exemption, the Company’s Key Information Document has disclosed ‘the
costs that the Investment Manager takes for managing your investment’ as 0%, as annual
management charges are already deducted as an expense from reported earnings, with its
European MiFID Template disclosing the Company’s ‘ongoing costs’ as its OCR (excluding
direct property costs).
66 23 Weighted average of annualised cash rents at the year-end date and ERV, less
estimated non-recoverable property operating expenses, divided by property valuation
plus estimated purchaser’s costs. Source: Knight Frank.
67 24 2024 includes £11.0m of assets sold since the year end classified as
‘held-for-sale’.
68 25 Current passing rent plus ERV of vacant properties.
69 26 As defined by the Corporation Tax Act 2010.
70 27 Electricity is being both imported by the tenant and exported to the grid.
71 28 Source: Moody’s.
72 29 Comprising investment property, assets held-for-sale and PV.
73 30 Including assets held-for-sale.
74 31 Assumed at 6.5% of investment property valuation.
75 32 Annualised cash rents at the year date.
76 33 Non-recoverable directly incurred operating expenses of vacant rental property
and ground rent costs.
77 34 Adjustment for the expiration of lease incentives.
════════════════════════════════════════════════════════════════════════════════════════
Dissemination of a Regulatory Announcement that contains inside information in
accordance with the Market Abuse Regulation (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB00BJFLFT45
Category Code: MSCH
TIDM: CREI
LEI Code: 2138001BOD1J5XK1CX76
OAM Categories: 1.1. Annual financial and audit reports
Sequence No.: 392434
EQS News ID: 2154014
End of Announcement EQS News Service
══════════════════════════════════════════════════════════════════════════
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