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Custodian REIT PLC confident of its strengths in a low-return


“In a low return environment, we believe that property returns will look attractive and the search for income and long-term capital security will bring many investors back to real estate”

Custodian REIT PLC (LON:CREI) said cash collection in the first half of its financial year had been better than expected, considering the coronavirus (COVID-19) pandemic impact.

Adjusted for contractual rent deferrals, Custodian said 88% of rent due was collected in the six months to the end of September, 2020.

The cash collection rate allowed a 2p interim dividend to be announced at the end of October, which is one-third above the minimum level of 1.5p announced by the real estate investment trust (REIT) in April 2020 before the full impact of the national lockdown could be ascertained.

READ Custodian REIT hikes quarterly dividend as property investment activity rebounds

Custodian said the coronavirus (COVID-19) pandemic continues to hit the property market and its tenants, contributing to a decrease of £27.4mln in the valuation of its property portfolio over the reporting period.

The group’s net asset value (NAV) per share at the end of September stood at 95.2p, compared to 101.6p at the end of March; NAV total return (i.e. including dividends), therefore, was negative for the half-year at -3.7%.

The (non-cash) adjustment to the valuation of the property portfolio means Custodian posted a loss before tax for the period of £16.08mln, compared to a profit before tax of £727,000 in the same period of last year.

Earning per share, calculated using industry-standard measures, decreased to 2.6p (2019: 3.4p) due to a £2.9mln increase in the doubtful debt provision and a £1.9mln decline in the annual rent roll since the end of March.

David Hunter, the chairman of the REIT, said these are testing times for the property sector.

“We expect further tenant failures as Government support packages are withdrawn, the November 2020 English lockdown and subsequent restrictions bite and while CVAs [company voluntary administrations] remain legal, if questionable, practice, but this is likely to be heavily weighted towards the retail sector and should not diminish the overall appeal of real estate,” Hunter noted in the results statement.

“In a low return environment, we believe that property returns will look attractive and the search for income and long-term capital security will bring many investors back to real estate.

“The COVID-19 pandemic has reinforced Custodian REIT’s strategy which has always placed income and financial resilience at the heart of the company’s objectives. When allied to the appropriate property strategy this focus underpins sustainable dividends, which in turn support total return, and we remain committed to both growing the dividend on a sustainable basis and delivering capital value growth for our shareholders over the long-term,” Hunter concluded.



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