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CREI Custodian Property Income Reit Plc

81.40
6.10 (8.10%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Custodian Property Income Reit Plc LSE:CREI London Ordinary Share GB00BJFLFT45 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  6.10 8.10% 81.40 81.60 82.70 86.30 79.00 79.00 5,283,785 16:35:17
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Real Estate Investment Trust 44.15M -65.82M -0.1493 -5.55 365.02M

Custodian REIT plc : Unaudited Net Asset Value as at 30 September 2018 (736493)

23/10/2018 8:33am

UK Regulatory


Dow Jones received a payment from EQS/DGAP to publish this press release.

 
 
 Custodian REIT plc (CREI) 
Custodian REIT plc : Unaudited Net Asset Value as at 30 September 2018 
 
23-Oct-2018 / 08:26 GMT/BST 
Dissemination of a Regulatory Announcement that contains inside information 
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
           23 October 2018 
 
     Custodian REIT plc 
 
     ("Custodian REIT" or "the Company") 
 
     Unaudited Net Asset Value as at 30 September 2018 
 
        Custodian REIT (LSE: CREI), the UK commercial real estate investment 
       company, today reports its unaudited net asset value ("NAV") as at 30 
         September 2018 and highlights for the period from 1 July 2018 to 30 
           September 2018 ("the Period"). 
 
           Financial highlights 
 
  · NAV total return per share1 for the Period of 2.3% 
 
  · Dividend per share approved for the Period of 1.6375p 
 
  · NAV per share of 108.6p (30 June 2018: 107.8p) 
 
  · NAV of GBP427.5m (30 June 2018: GBP416 .9m) 
 
  · Net gearing2 of 20.5% loan-to-value (30 June 2018: 21.0%) 
 
  · GBP8.4m3 of new equity raised during the Period at an average premium of 
  13.2% to dividend adjusted NAV per share at 30 June 2018 
 
  · Market capitalisation of GBP478.1m (30 June 2018: GBP467.3m) 
 
           Portfolio highlights 
 
  · Portfolio value of GBP547.0m (30 June 2018: GBP537.4m) 
 
  · GBP19.2m4 invested in five property acquisitions, one development and one 
  refurbishment 
 
  · GBP2.2m valuation increase from successful asset management initiatives 
 
  · EPRA occupancy5 96.9% (30 June 2018: 96.7%) 
 
  · GBP4.4m6 gross profit on disposal of two properties for an aggregate 
  consideration of GBP13.1m 
 
1 NAV per share movement including dividends approved for the Period. 
 
2 Gross borrowings less unrestricted cash divided by portfolio valuation. 
 
3 Before costs and expenses of GBP0.1m. 
 
4 Before acquisition costs of GBP1.1m. 
 
5 Estimated rental value ("ERV") of let property divided by total portfolio 
ERV. 
 
6 Before disposal costs of GBP0.1m. 
 
           Net asset value 
 
          The unaudited NAV of the Company at 30 September 2018 was GBP427.5m, 
reflecting approximately 108.6p per share, an increase of 0.7% since 30 June 
           2018: 
 
                                                 Pence per    GBPm 
                                                     share 
 
NAV at 30 June 2018                                  107.8 416.9 
Issue of equity (net of costs)                         0.2   8.3 
 
Valuation movements relating to: 
- Profit on disposal of investment                     1.1   4.3 
properties 
- Asset management activity                            0.5   2.2 
- Other valuation movements                          (0.9) (3.7) 
                                                       0.7   2.8 
Acquisition costs                                    (0.3) (1.1) 
Net valuation movement                                 0.4   1.7 
 
Income earned for the Period                           2.5   9.7 
Expenses and net finance costs for the               (0.7) (2.8) 
Period 
Dividends paid7                                      (1.6) (6.3) 
 
NAV at 30 September 2018                             108.6 427.5 
 
7 Dividends of 1.6375p per share were paid on shares in issue throughout the 
Period. 
 
     During the Period the initial costs (primarily stamp duty) of investing 
     GBP19.2m (before acquisition costs) diluted NAV per share total return by 
  0.3p, partially offset by raising new equity of GBP8.3m (net of costs) at an 
 average 13.2% premium to dividend adjusted NAV, which added 0.2p per share. 
 
    The NAV attributable to the ordinary shares of the Company is calculated 
      under International Financial Reporting Standards and incorporates the 
  independent portfolio valuation as at 30 September 2018 and income for the 
 Period but does not include any provision for the approved dividend for the 
           Period to be paid on 30 November 2018. 
 
          The Company completed the following investments during the Period: 
 
· Acquisition of a car dealership in Shrewsbury occupied by TJ Vickers for 
GBP1.675m, with a net initial yield8 ("NIY") of 6.75% and a weighted average 
unexpired lease term to first break or expiry ("WAULT") of seven years; 
 
· Acquisition of two car dealerships in Stafford and Shrewsbury occupied 
by VW Group UK Limited for an aggregate purchase price of GBP7.375m, with a 
NIY of 6.38% and a WAULT of six years; 
 
· Acquisition of a distribution unit on Hilton Business Park, Derby 
occupied by Daher Aerospace Limited for GBP5.585m, with a NIY of 6.72% and a 
WAULT of 13 years; 
 
· Acquisition of an office building within Riverside Exchange, Sheffield 
occupied by branches of the Home Office and the Health and Safety 
Executive for GBP3.56m, with a NIY of 9.79% and a WAULT of four years; and 
 
· Capital expenditure of GBP1.0m, primarily on the development of a 
Starbucks drive-through restaurant in Maypole, Birmingham and the 
refurbishment of a multi-let office building in Birmingham. 
 
8 Passing rent divided by property valuation plus assumed purchaser's costs. 
 
           Asset management 
 
 Owning the right properties at the right time is a key element of effective 
  portfolio management, which necessarily involves some selling from time to 
        time to balance the portfolio. While Custodian REIT is not a trader, 
       identifying opportunities to dispose of assets significantly ahead of 
      valuation, or that no longer fit the Company's investment strategy, is 
           important. During the Period the following properties were sold: 
 
· An industrial unit in Southwark for GBP12.0m, GBP4.4 million (58%) ahead of 
its 30 June 2018 valuation. The lack of available investment stock in 
Central London, strong investment demand and a recent, substantial rental 
increase had led to significant recent valuation increases. In addition, 
redevelopment potential and the identification of a special purchaser 
offering a NIY of 2.95% allowed us to crystallise a substantial profit; 
and 
 
· A town centre retail unit in Dumfries for GBP1.125m, in line with its 30 
June 2018 valuation, as we did not anticipate future rental growth. 
 
    A continued focus on active asset management including rent reviews, new 
        lettings, lease extensions and the retention of tenants beyond their 
     contractual break clauses resulted in a GBP2.2m valuation increase in the 
           Period, primarily due: 
 
· Letting the Company's largest vacant property, an industrial unit in 
Tamworth, to ICT Express on a 10 year lease without break at a 28% higher 
rent, which increased the valuation by GBP1.3m; 
 
· Agreeing a new 10 year lease with Teleperformance of an industrial unit 
in Ashby-de-la-Zouch, with annual rent increasing by 15% to GBP0.5m, which 
increased the valuation by GBP0.5m; 
 
· Documenting a reversionary lease with Synergy Health at an industrial 
building at Sheffield Parkway to extend the lease by 7.5 years until 2034 
and adjust the rent review pattern to increase in line with RPI, which 
increased the valuation by GBP0.2m; 
 
· Securing an open market 10% rental increase at an office in, Grove Park, 
Leicester which increased the valuation by GBP0.1m; and 
 
· Securing an open market 7% rental increase at a public house in High 
Wycombe, which increased the valuation by GBP0.1m. 
 
 Further initiatives on other properties currently under review are expected 
        to complete during the current quarter, although growth in rents and 
      positive asset management outcomes have been tempered by the following 
           recent events: 
 
· The company voluntary arrangement ("CVA") of Homebase resulted in the 
Company experiencing a 35% annual rent reduction from GBP524k to GBP341k, but 
with the opportunity to terminate the lease if better terms can be agreed 
with an alternative tenant. The property is centrally located in Leighton 
Buzzard, adjacent to Tesco and Aldi; 
 
· In Milton Keynes, the CVA of Office Outlet (formerly Staples) resulted 
in the tenant contracting into 50% of the space previously occupied, with 
rent halving from GBP419k pa to GBP209k pa; and 
 
· In Crewe we took the difficult decision to implement a forfeiture of the 
lease of a Bowling operator which failed to pay its rent, protecting the 
Company's position and opening up the opportunity of re-letting to a 
stronger tenant. Passing rent on the unit was GBP200k pa. 
 
 The portfolio's WAULT decreased from 5.9 years at 30 June 2018 to 5.6 years 
  principally due to the natural 0.25 of a year's decline due to the passage 
 of time over the Period, with the positive impact of acquisitions and asset 
           management activities offset by the CVA rent reductions and lease 
           forfeiture. 
 
           Property market 
 
        Commenting on the commercial property market outside London, Richard 
         Shepherd-Cross, Managing Director of Custodian Capital Limited (the 
           Company's discretionary investment manager) said: 
 
      "Investment market demand has continued in Q3 from property companies, 
    institutions, private investors and from overseas investors. While there 
   have been marginal outflows from the open-ended funds and many REIT's are 
 trading at a discount to NAV, the demand for income focused investments has 
    not abated. The rise in UK interest rates was sufficiently well forecast 
 that it had an imperceptible impact on the market and there does not appear 
           to be an imminent threat of meaningful rate rises in prospect. 
 
    "The continued demand for industrial/logistics properties has led to the 
    sector showing the lowest initial yields in regional markets. This is in 
large part explained by the rental growth prospects in the sector, which are 
       being driven by both occupational demand but more crucially a lack of 
 supply. This has led to an increase in speculative development, principally 
     of 'big box' logistics units. We have yet to witness an increase in the 
  development of smaller or mid-sized industrial units, so the rental growth 
   dynamics might be stronger at this end of the market. The strength of the 
       industrial market was evident in the sale of the Company's industrial 
building in Southwark. Not only had we recently secured a rental uplift from 
   GBP9 per sq ft to GBP16 per sq ft, demonstrating extraordinary rental growth, 
  but we managed to sell the property for a price reflecting a NIY of 2.95%, 
    based on the increased rent. Industrial property remains a very good fit 
     with the Company's strategy, but recent price inflation is limiting the 
         opportunity to acquire properties that meet the investment mandate. 
    Notwithstanding this challenge, we added to the industrial sector of the 
      portfolio during the Period and I expect the sector to remain a strong 
           driver of rental growth for the Company. 
 
"Investment in the regional office market has also been consistently strong, 
     which has coincided with a number of the UK's 'big six' regional cities 
  hitting record rental levels for prime offices. Like the industrial sector 
          it is restricted supply, the lack of development and the extensive 
     conversion of secondary offices to residential which is maintaining the 
   upward pressure on rents. However, we are conscious that obsolescence and 
 lease incentives can be a real cost of office ownership, which can hit cash 
  flow and be at odds with the Company's relatively high target dividend, so 
           we remain very selective, although open to opportunities. 
 
    "There is a general move against retail, as many institutional investors 
   feel overweight in the sector in a quarter when we have also witnessed an 
increase in CVA activity. While the easy explanation for the changing retail 
       market is the rise of online retailing, the real picture is much more 
         complex. Over-gearing, poor management strategy and an inability to 
 modernise over an extended period of time has had a more detrimental impact 
  on certain retailers than the internet. The challenge in the retail sector 
     is not so much identifying the retailers who will prevail in the modern 
  retail environment, but to identify trends in rental levels in both retail 
sub-sectors and locations. In many locations rents need to adjust to support 
    retailers, not least because labour costs and business rates are rising. 
 
  "We generally feel comfortable that retail warehousing, with low rents per 
 sq ft, 'big box' formats and free parking will be more robust than the High 
    Street. Following in the footsteps of the USA the UK retail landscape is 
        increasingly polarising, with robust city centre retail in the major 
        conurbations where the experience of retail and leisure together has 
remained attractive, and resilient out of town retail in smaller towns where 
           convenience and choice is the stock-in-trade. 
 
 "There is continued weakness in secondary high street retail locations with 
   rental levels still under pressure and a very real threat of vacancy, but 
  retailers are still keen to have representation on prime high streets. The 
    challenge across all high street retail locations is to understand where 
    rental levels will settle following the current retail shakeout. We will 
     continue to rebalance the portfolio to focus on strong retail locations 
         while working on an orderly disposal of those assets we believe are 
           ex-growth. 
 
       "Across the portfolio we settled five rent reviews and agreed two new 
  lettings during the Period which have shown a weighted average increase in 
  rents of 9.5%. This growth has come from a mix of open market lettings and 
   rent reviews in industrial and office properties together with one public 
 house and two RPI linked rent reviews, one in retail warehousing and one in 
    the motor trade. This demonstrates the continuing opportunity to enhance 
           earnings across Custodian REIT's diverse regional portfolio." 
 
           Portfolio Analysis 
 
  At 30 September 2018 the Company's property portfolio comprised 151 assets 
     with a NIY of 6.59%. The portfolio is split between the main commercial 
        property sectors, in line with the Company's objective to maintain a 
  suitably balanced investment portfolio. Slight swings in sector weightings 
        are reflective of market pricing at any given time and the desire to 
   maintain an opportunistic approach to acquisitions. Sector weightings are 
           shown below: 
 
                  Valuation    Period Weighting by Weighting by 
                            valuation   income9 30   income9 30 
                             movement     Sep 2018     Jun 2018 
 
                30 Sep 2018 
 
                                   GBPm 
 
                         GBPm 
 
Sector 
 
Industrial            218.8       3.5          39%          40% 
Retail                101.1     (3.5)          18%          20% 
warehouse 
Other10                93.3     (1.0)          17%          15% 
High street            73.4     (0.3)          14%          14% 
retail 
Office                 60.4     (0.2)          12%          11% 
 
Total                 547.0     (1.5)         100%         100% 
 
           9 Current passing rent plus ERV of vacant properties. 
 
          10 Includes car showrooms, petrol filling stations, children's day 
           nurseries, restaurants, gymnasiums, hotels and healthcare units. 
 
  GBP3.2m of the valuation decrease within the retail warehouse sector was due 
 to the CVA's of Homebase and Office Outlet (formerly Staples) impacting the 
         Company's units in Leighton Buzzard and Milton Keynes respectively. 
 
  The Company operates a geographically diversified portfolio across the UK, 
seeking to ensure that no one area represents the majority of the portfolio. 
 The geographic analysis of the Company's portfolio at 30 September 2018 was 
           as follows: 
 
                    Valuation     Period   Weighting   Weighting 
                               valuation by income11 by income11 
                                movement      30 Sep 30 Jun 2018 
                                                2018 
                  30 Sep 2018 
 
                                      GBPm 
 
                           GBPm 
 
Location 
 
West Midlands           118.1        1.4         21%         19% 
North-West               90.7      (1.0)         17%         18% 
South-East               78.8      (3.5)         13%         15% 
East Midlands            69.3        0.7         14%         13% 
South-West               61.4        0.2         11%         11% 
North-East               49.1        0.4          9%          8% 
Scotland                 44.5        0.3          8%          9% 
Eastern                  28.6          -          6%          6% 
Wales                     6.5          -          1%          1% 
 
Total                   547.0      (1.5)        100%        100% 
 
           11 Current passing rent plus ERV of vacant properties. 
 
           For details of all properties in the portfolio please see 
           www.custodianreit.com/property-portfolio [1]. 
 
           Activity and pipeline 
 
           Commenting on pipeline, Richard Shepherd-Cross said: 
 
   "The benefit of a diversified investment strategy is that it allows us to 
review all sectors and regions of the UK to identify opportunities that will 
support the dividend policy. This has allowed us to acquire GBP18.2m of assets 
in the last quarter at an average NIY of 7.16%. We have a committed pipeline 
     of opportunities with terms agreed totaling GBP27.1m at an average NIY of 
    6.45% which keeps us on course for the year in relation to target income 
yield. Looking ahead, we are not averse to making judicious, contra-cyclical 
    acquisitions where we believe that short-term market weakness can unlock 
           long term value for the Company." 
 
           Financing 
 
           Equity 
 
  The Company issued 7m new ordinary shares of 1p each in the capital of the 
Company during the Period ("the New Shares") raising GBP8.4m (before costs and 
 expenses). The New Shares were issued at an average premium of 13.2% to the 
   unaudited NAV per share at 30 June 2018, adjusted to exclude the dividend 
           paid on 31 August 2018. 
 
           Debt 
 
           At the Period end the Company operated: 
 
· A GBP35m revolving credit facility ("RCF") with Lloyds Bank plc, which 
attracts interest of 2.45% above three-month LIBOR and expires on 13 
November 2020; 
 
· A GBP20m term loan with Scottish Widows plc, which attracts interest fixed 
at 3.935% and is repayable on 13 August 2025; 
 
· A GBP45m term loan with Scottish Widows plc which attracts interest fixed 
at 2.987% and is repayable on 5 June 2028; and 
 
· A GBP50m term loan with Aviva Investors Real Estate Finance comprising: 
 
        i) A GBP35m tranche repayable on 6 April 2032, attracting fixed annual 
           interest of 3.02%; and 
 
     ii) A GBP15m tranche repayable on 3 November 2032 attracting fixed annual 
           interest of 3.26%. 
 
           Dividends 
 
 An interim dividend of 1.6375p per share for the quarter ended 30 June 2018 
      was paid on 31 August 2018. The Board has approved an interim dividend 
  relating to the Period of 1.6375p per share payable on 30 November 2018 to 
           shareholders on the register on 26 October 2018. 
 
        In the absence of unforeseen circumstances, the Board intends to pay 
   quarterly dividends to achieve a target dividend12 per share for the year 
    ending 31 March 2019 of 6.55p (2018: 6.45p). The Board's objective is to 
  grow the dividend on a sustainable basis, at a rate which is fully covered 
  by projected net rental income and does not inhibit the flexibility of the 
           Company's investment strategy. 
 
         12 This is a target only and not a profit forecast. There can be no 
  assurance that the target can or will be met and it should not be taken as 
           an indication of the Company's expected or actual future results. 
  Accordingly, shareholders or potential investors in the Company should not 
   place any reliance on this target in deciding whether or not to invest in 
   the Company or assume that the Company will make any distributions at all 
and should decide for themselves whether or not the target dividend yield is 
           reasonable or achievable. 
 
     - Ends - 
 
Further information: 
 
     Further information regarding the Company can be found at the Company's 
           website www.custodianreit.com [2] or please contact: 
 
          Custodian Capital Limited 
Richard Shepherd-Cross / Nathan         Tel: +44 (0)116 240 8740 
Imlach / Ian Mattioli MBE 
                                    www.custodiancapital.com [3] 
 
Numis Securities Limited 
Hugh Jonathan / Nathan Brown  Tel: +44 (0)20 7260 1000 
                                   www.numis.com/funds 
 
Camarco 
Ed Gascoigne-Pees Tel: +44 (0)20 3757 4984 
                         www.camarco.co.uk 
 
           Notes to Editors 
 
Custodian REIT plc is a UK real estate investment trust, which listed on the 
    main market of the London Stock Exchange on 26 March 2014. Its portfolio 
    comprises properties predominantly let to institutional grade tenants on 
long leases throughout the UK and is principally characterised by properties 
            with individual values of less than GBP10 million at acquisition. 
 
        The Company offers investors the opportunity to access a diversified 
      portfolio of UK commercial real estate through a closed-ended fund. By 
targeting sub GBP10 million lot-size, regional properties, the Company intends 
  to provide investors with an attractive level of income with the potential 
           for capital growth. 
 
    Custodian Capital Limited is the discretionary investment manager of the 
           Company. 
 
           For more information visit www.custodianreit.com [2] and 
           www.custodiancapital.com [3]. 
 
ISIN:          GB00BJFLFT45 
Category Code: NAV 
TIDM:          CREI 
Sequence No.:  6289 
EQS News ID:   736493 
 
End of Announcement EQS News Service 
 
 
1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=be531edfb7113375e33d32944df93de5&application_id=736493&site_id=vwd_london&application_name=news 
2: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=44eae66ce326b2005a19503bbab5faed&application_id=736493&site_id=vwd_london&application_name=news 
3: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=c24dec6d0ea6c746569ddd52de0eca8d&application_id=736493&site_id=vwd_london&application_name=news 
 

(END) Dow Jones Newswires

October 23, 2018 03:33 ET (07:33 GMT)

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