REG-Custodian Property Income REIT plc Custodian Property Income REIT plc: Active asset management continues to drive income and valuation growth, underpinning fully covered dividend
Thu 07:02
============
Custodian Property Income REIT plc (CREI)
Custodian Property Income REIT plc: Active asset management continues to
drive income and valuation growth, underpinning fully covered dividend
08-May-2025 / 07:00 GMT/BST
═════════════════════════════════════════════════════════════════════════════
8 May 2025
Custodian Property Income REIT plc
(“Custodian Property Income REIT” or “the Company”)
Active asset management continues to drive income and valuation growth,
underpinning fully covered dividend
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
provides a trading update for the quarter ended 31 March 2025 (“Q4” or the
“Quarter”) and the year ended 31 March 2025 (“FY25”).
Commenting on the trading update, Richard Shepherd-Cross, Managing Director
of the Investment Manager, Custodian Capital Limited, said: “This Quarter’s
performance further emphasised the benefits of portfolio diversification,
which combined with our hands on approach to generating strong income growth,
has helped support three consecutive quarters of capital appreciation. We
believe the current discount provides an attractive entry point for
investors, especially given our long track record of fully covering the
dividend, with shares currently yielding around 8%. The 17 lettings, lease
renewals, re-gears and rent reviews we completed during the Quarter were
achieved at significant aggregate premiums to ERV and previous rent, and our
ongoing investment in solar panels at our properties has begun to prove its
worth as a potential source of future revenue and value creation.
“We also believe that during periods of trade uncertainty such as the one the
world now finds itself in, it would not be unreasonable to view UK real
estate as a relatively safe haven for investors seeking stable asset backed
income in established and secure jurisdictions. This should be particularly
true for the Company’s diversified investment strategy that generally targets
sub £10m, higher yielding, regional assets across the UK, that principally
serve a local and/or domestic market.”
Highlights
Strong leasing activity continues to support rental growth, underpinning
fully covered dividend
• 1.5p dividend per share approved for the Quarter, achieving aggregate
FY25 dividends per share of 6.0p, in line with target, and fully covered
by unaudited EPRA earnings per share 1 1
• Target dividends per share of no less than 6.0p for the year ending 31
March 2026. This target dividend represents a 7.9% yield 2 2 based on
the prevailing 76p share price 3 3
• EPRA earnings per share of 1.6p for the Quarter (Q3: 1.5p)
• EPRA occupancy 4 4 decreased to 91.1% (31 Dec 2024: 93.4%), primarily
due to a previously flagged industrial unit becoming vacant in
Biggleswade, which provides an opportunity to refurbish and improve the
rental rate, and an office in Sheffield where we are assessing the
options. The industrial asset in Biggleswade is already under offer to
let subject to a refurbishment. 4.0% of estimated rental value (“ERV”)
is vacant and being or about to be refurbished or under offer to let or
sell (31 Dec 2024: 1.8%)
• During the Quarter, this decrease in occupancy resulted in a 1.2%
decrease in like-for-like 5 5 passing rent. However, like-for-like ERV
increased by 1.5%, primarily driven by 2.1% like-for-like growth in the
industrial sector
• Significant potential for further income growth with the portfolio’s ERV
of £50.2m exceeding the current passing rent of £43.9m by 14% (31 Dec
2024: 11%). Approximately 30% of this reversion is available from
leasing events with the remainder from letting vacant space. Based on
our track record and occupier demand for space, we expect to capture this
potential rental upside at (typically) five-yearly rent reviews or on
re-letting, with an opportunity to do so across c. 17% of the portfolio’s
income in FY26. We expect to also continue to drive passing rent and ERV
growth further through asset management initiatives
• Leasing activity during the Quarter comprised the completion of two rent
reviews at an average 31% increase in annual rent, nine lease renewals
and regears in aggregate 11% ahead of ERV and 13% ahead of the previous
rent, and letting six vacant units
Valuations growing across the Company’s c.£594m portfolio, with a 1.2% uptick
on a like-for-like basis
• Q4 net asset value (“NAV”) total return per share 6 6 of 3.4%
• NAV per share grew by 1.8% to 96.1p (31 Dec 2024: 94.4p) with a NAV of
£423.5m (31 Dec 2024: £416.1m)
• The value of the Company’s portfolio of 151 assets at the Quarter end was
£594.4m (31 Dec 2024: £586.4m), a like-for-like increase of 1.2% during
the Quarter, net of £0.8m of capital expenditure. Benefitting from a
diversified portfolio, during FY25, the Company has seen a like-for-like
portfolio valuation increase of 2.2%
Capital investment continues to be accretive
• £0.8m of capital expenditure undertaken during the Quarter, primarily
relating to the refurbishment of an industrial building in Plymouth and
combining two units to facilitate a letting at a retail warehouse in
Southport
• During the Quarter, the Company generated £0.1m (Q3: £0.1m) of revenue
from its owned solar panel installations across 10 assets, selling the
renewable electricity generated to tenants and exporting any surplus. The
Company has invested £1.3m installing solar panels during the last 12
months which is coming on stream and installations are under
consideration at 12 further sites over the next 12 months
• The Company’s first six solar panel installations were revalued at 31
March 2025 7 7 , resulting in a £0.7m valuation increase. Remaining
arrays will be valued over the course of the next financial year as each
array’s annual performance information becomes available
• Weighted average energy performance certificate rating was C(51) (31 Dec
2024: C(52)) with re-ratings being carried out across 17 units during the
Quarter
Prudent debt levels
• Net gearing 8 8 was 27.9% loan-to-value at 31 March 2025 (31 Dec 24:
28.5%).
• £175m (31 Dec 24: £171m) of drawn debt at 31 March 2025 comprising £140m
(80%) of fixed rate debt and £35m (20%) drawn under the Company’s
variable rate revolving credit facility (“RCF”)
• Weighted average cost (“WAC”) of aggregate borrowings remained at 3.9%
(31 Dec 24: 3.9%)
• The Board intends to utilise the Company’s RCF to repay a £20m fixed rate
loan which is due to expire in August 2025. This refinancing is expected
to have a minimal impact on the Company’s WAC, as this loan represents
only 11% of drawn debt
£120m of longer-term fixed-rate debt facilities have a weighted average term
of 5.0 years and a WAC of 3.4%, offering significant medium-term interest
rate risk mitigation
Dividends
The Company paid an interim dividend per share of 1.5p on 28 February 2025
relating to Q3, fully covered by EPRA earnings.
The Board has approved a fully covered interim dividend per share of 1.5p for
the Quarter payable on Friday 30 May 2025 to shareholders on the register on
25 April 2025, which will be designated as a property income distribution
(“PID”).
The Board is targeting a dividend per share of no less than 6.0p for the year
ending 31 March 2026.
Historical income performance
The table below sets out the Company’s dividend performance over the last
five years which, aside from the post-COVID industrial sector pricing spike
in 2022, shows the high and growing level of income returns produced by the
Company’s portfolio as a proportion of NAV.
Year ending 31 March
2025 2024 2023 2022 2021
NAV per share (p) 96.1 93.4 99.3 119.7 97.6
Dividend per share (p) 6.0 5.8 5.5 5.25 5.0
Yield on NAV 6.2% 6.2% 5.5% 4.4% 5.1%
Over this five-year period, total dividends were £120m, averaging 5.5p per
share per annum.
Net asset value
The Company’s unaudited NAV increased to £423.5m, or approximately 96.1p per
share, at 31 March 2025:
Pence per share £m
NAV at 31 December 2024 94.4 416.1
Valuation increases and depreciation 1.6 7.1
EPRA earnings for the Quarter 1.6 6.9
Interim quarterly dividend, paid during the Quarter, (1.5) (6.6)
relating to Q3
NAV at 31 March 2025 96.1 423.5
The unaudited NAV attributable to the ordinary shares of the Company is
calculated under International Financial Reporting Standards and incorporates
the independent portfolio valuation at 31 March 2025 and net income for the
Quarter. The movement in unaudited NAV reflects the payment of an interim
dividend per share of 1.5p during the Quarter, but as usual this does not
include any provision for the approved dividend of 1.5p per share for the
Quarter to be paid on Friday 30 May 2025.
Market update
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, primarily driven by rental
growth but also through emerging yield compression.
The consistent thread in the story of the 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 in recent years is maintaining pressure on supply and
supporting rental growth.
Post Quarter-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 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 ended 31 March 2025 of 6.0p
offered a dividend yield of 7.9% at 31 March 2025, as weak economic
confidence pushed the share price to a discount to NAV of c.19%. We believe
this fundamentally undervalues the security and quality of income offered
through our fully covered dividend. Despite the fact that we continually
demonstrate our ability to realise sales at premiums to book value, the
discount remains somewhat less than the UK listed real estate market average
discount of c. 28%. This suggests to us 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 while
others are letting the grass grow under their feet. 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 giving investors an
immediate capital accretion, 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.
Asset management
Custodian Capital Limited, the Investment Manager, has remained focused on
active asset management during the Quarter, completing:
• Two rent reviews with an aggregate 31% increase in annual rent (£61k per
annum), in line with ERV;
• Nine lease renewals and regears, in aggregate 11% ahead of ERV and 13%
ahead of the previous passing rent; and
• Letting/licensing six vacant units with annual rent of £178k.
These initiatives had a positive impact on weighted average unexpired lease
term, which increased by 0.2 years to 5.0 years during the Quarter (31 Dec
2024: 4.8 years).
Further details of these asset management initiatives are shown below:
Rent reviews
• At an industrial unit in Manchester, increasing the passing rent by 37%
from £164k to £225k
• At a retail unit in Dunfermline, rent maintained at £28k per annum
Renewals
• Six-year lease renewal with Nicwood Logistics at an industrial unit in
Burton upon Trent, increasing annual rent by 30% to £650k
• Removal of a tenant break option with Total Fitness in Lincoln, extending
the lease by five years in return for four months’ rent free, with annual
rent remaining £431k
• 10-year lease renewal with Northern Commercials at an industrial unit in
Manchester, increasing annual rent by 37% to £225k, with the open market
rent review settled simultaneously
• Five-year lease renewal with Halfords at a retail warehouse unit in
Carlisle, increasing annual rent by 6% to £163k
• Five-year lease renewal with Poundland at a high street retail unit in
Portsmouth, with annual rent decreasing to £75k reflecting prevailing
market rates
• 10-year lease renewal to Precision Pumping and Metering at an industrial
unit in Aberdeen (Unit 6), with a tenant break option on the fifth
anniversary, increasing annual rent by 31% to £48k
• Removal of a tenant break option with Majestic Wines at a retail
warehouse unit in Portishead, extending the lease by five years and
maintaining the annual rent at £45k
• 10-year lease renewal with British Red Cross Society at a retail
warehouse unit in Dunfermline, with a tenant break option on the fifth
anniversary, increasing annual rent by 15% to £37k
• 10-year lease renewal with Exitus Escape Rooms at a retail unit in
Cardiff, with a tenant break option in the fifth anniversary, maintaining
the annual rent at £22k
Vacant premises
£0.2m of new annual rental income was added to the rent roll through letting
six vacant units, in aggregate, in line with ERV:
• A 10-year lease to Hotel Chocolat at a retail unit in Winchester, with a
tenant only break option in the fifth year of the term, at an annual rent
of £115k;
• A 10-year lease to Precision Pumping and Metering at an industrial unit
in Aberdeen (Unit 5), with a tenant break option in the fifth year, at an
annual rent of £30k;
• Three new leases at industrial units in Atherstone, of five-six years in
length, at a combined annual rent of £28k; and
• A licence to Commercial Property Care at a storeroom in an office
building in Birmingham, at an annual rent of £5k.
The positive impact of these initiatives was offset by new vacancy at assets
in Biggleswade (industrial), Sheffield (offices) and Knowsley (industrial),
which in aggregate decreased the rent roll by £0.9m (2.0%). These assets
have an ERV of £1.2m and offer asset management opportunities to crystallise
this £0.3m reversionary potential. The largest asset (Biggleswade) is
already under offer to let, subject to a £1.7m refurbishment, which on
completion will crystallise an existing £0.2m annual rental reversion plus
deliver a yield on expected refurbishment cost of more than 7%.
Post Quarter-end asset management activity
Post Quarter-end the following new leases/renewals added an aggregate £0.3m
to the rent roll:
• A 10-year lease to Romac Logistics at an industrial unit in Motherwell,
following the previous tenant exercising the break option and
surrendering early, with annual rent increasing by 30% to £813k;
• A 10-year lease renewal with DHL at an industrial unit in Glasgow, with a
tenant only break option in the fifth anniversary, increasing passing
rent by 33% to £146k; and
• A five-year lease of a vacant floor to Positive Planet at offices in
Manchester, following a comprehensive refurbishment of the building, with
annual rent of £99k, reflecting an uplift of 95% on the rental rate prior
to the works being undertaken.
Borrowings
At 31 March 2025 the Company had £175m of debt drawn comprising:
• £35m (20%) at a variable prevailing interest rate of 6.1% and a facility
maturity of 2.6 years; and
• £140m (80%) at a weighted average fixed rate of 3.4% with a weighted
average maturity of 5.0 years.
At 31 March 2025 the Company’s borrowing facilities were:
Variable rate borrowing
• 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, expiring on 10 November 2027. The facility
limit can be increased to £75m with Lloyds’ approval.
Fixed rate borrowing
• A £20m term loan with Scottish Widows plc (“SWIP”) repayable on
13 August 2025 with interest fixed at 3.935%;
• A £45m term loan with SWIP repayable on 5 June 2028 with interest fixed
at 2.987%; and
• A £75m term loan with Aviva comprising:
▪ A £35m tranche repayable on 6 April 2032 with fixed annual interest
of 3.02%;
▪ A £25m tranche repayable on 3 November 2032 with fixed annual
interest of 4.10%; and
▪ A £15m tranche repayable on 3 November 2032 with fixed annual
interest of 3.26%.
Each facility has a discrete security pool, comprising a number of individual
properties, over which the relevant lender has security and covenants:
• The maximum LTV of the discrete security pools is either 45% or 50%, with
an overarching covenant on the property portfolio of a maximum of 35% or
40% LTV; and
• Historical interest cover, requiring net rental receipts from the
discrete security pools, over the preceding three months, to exceed
either 200% or 250% of the associated facility’s quarterly interest
liability.
Upcoming expiry
The Board intends to utilise the Company’s RCF to repay the £20m fixed rate
loan with SWIP due to expire in August 2025 and will consider longer-term
options once debt markets are more stable.
Portfolio analysis
At 31 March 2025, the portfolio was split between the main commercial
property sectors, in line with the Company’s objective to maintain a suitably
balanced investment portfolio. Sector weightings are shown below:
31 Mar 2025 31 Dec 2024
Quarter
Val’n valuation
movement Quarter
£m Weighting Weighting valuation Weighting Weighting
by value by income £m movement by value by income
Sector
Industrial 298.3 50% 42% 7.3 2.5% 49% 41%
Retail 127.3 21% 22% 1.0 0.8% 22% 22%
warehouse
Other 9 9 78.2 13% 13% 0.2 0.3% 13% 14%
Office 57.7 10% 16% (1.5) (2.6%) 10% 16%
High street 32.9 6% 7% (0.6) (1.6%) 6% 7%
retail
Total 594.4 100% 100% 6.4 100% 100%
For details of all properties in the portfolio please see
10 custodianreit.com/property-portfolio.
- Ends -
Further information:
Further information regarding the Company can be found at the Company's
website 11 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
12 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 / Tel: +44 (0)20 3727 1000
Andrew Davis / Oliver Parsons
13 custodianreit@fticonsulting.com
Notes to Editors
Custodian Property Income REIT plc is a UK real estate investment trust,
which listed on the main market of the London Stock Exchange on 26 March
2014. Its portfolio comprises properties predominantly let to institutional
grade tenants throughout the UK and is principally characterised by smaller,
regional, core/core-plus properties.
The Company offers investors the opportunity to access a diversified
portfolio of UK commercial real estate through a closed-ended fund. By
principally targeting smaller, regional, core/core-plus properties, the
Company seeks to provide investors with an attractive level of income with
the potential for capital growth.
Custodian Capital Limited is the discretionary investment manager of the
Company.
For more information visit 14 custodianreit.com and
15 custodiancapital.com.
═════════════════════════════════════════════════════════════════════════════
16 1 Profit after tax excluding net gains or losses on property divided by
weighted average number of shares in issue as defined by the European Public
Real Estate Association.
17 2 Prospective target dividend divided by share price.
18 3 Price on 7 May 2025. Source: London Stock Exchange.
19 4 ERV of let property divided by total portfolio ERV.
20 5 Adjusting for property acquisitions, disposals and capital
expenditure.
21 6 NAV per share movement including dividends paid during the Quarter.
22 7 Valuations have been undertaken for the first time at sites where
electricity has been both imported by the tenant and exported to the grid for
a period of at least 12 months.
23 8 Gross borrowings less cash (excluding rent deposits) divided by
property portfolio and solar panel valuations.
24 9 Comprises drive-through restaurants, car showrooms, trade counters,
gymnasiums, restaurants and leisure units.
═════════════════════════════════════════════════════════════════════════════
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: 3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 386889
EQS News ID: 2132534
End of Announcement EQS News Service
══════════════════════════════════════════════════════════════════════════
References
Visible links
1. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftn1
2. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftn2
3. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftn3
4. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftn4
5. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftn5
6. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftn6
7. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftn7
8. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftn8
9. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftn9
10. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=be531edfb7113375e33d32944df93de5&application_id=2132534&site_id=refinitiv~~~790ea929-3c21-49b8-8ff9-1aed464daef1&application_name=news
11. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=44eae66ce326b2005a19503bbab5faed&application_id=2132534&site_id=refinitiv~~~790ea929-3c21-49b8-8ff9-1aed464daef1&application_name=news
12. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=c24dec6d0ea6c746569ddd52de0eca8d&application_id=2132534&site_id=refinitiv~~~790ea929-3c21-49b8-8ff9-1aed464daef1&application_name=news
13. mailto:custodianreit@fticonsulting.com
14. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=44eae66ce326b2005a19503bbab5faed&application_id=2132534&site_id=refinitiv~~~790ea929-3c21-49b8-8ff9-1aed464daef1&application_name=news
15. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=c24dec6d0ea6c746569ddd52de0eca8d&application_id=2132534&site_id=refinitiv~~~790ea929-3c21-49b8-8ff9-1aed464daef1&application_name=news
16. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftnref1
17. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftnref2
18. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftnref3
19. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftnref4
20. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftnref5
21. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftnref6
22. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftnref7
23. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftnref8
24. file:///data/ucdp/tmp/xhtmlconvert_parsn_eqs_26CEOQjz.html#_ftnref9
============Recent news on Custodian Property Income Reit
See all newsREG-Custodian Property Income REIT plc Custodian Property Income REIT plc: Active asset management continues to drive income and valuation growth, underpinning fully covered dividend
AnnouncementRCS - Custodian Property - QuotedData's In The HotSeat Special
AnnouncementREG-Custodian Property Income REIT plc Custodian Property Income REIT plc: Interim dividend
AnnouncementREG-Custodian Property Income REIT plc Custodian Property Income REIT plc: Block Listing interim review
AnnouncementREG-Custodian Property Income REIT plc Custodian Property Income REIT plc: Diversified strategy, strong leasing and active asset management continue to drive income growth
Announcement