DJ Custodian Property Income REIT plc: Final results for the year ended 31 March 2023
Custodian Property Income REIT plc (CREI) Custodian Property Income REIT plc: Final results for the year ended 31 March 2023 15-Jun-2023 / 07:00 GMT/BST
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15 June 2023
Custodian Property Income REIT plc
("the Company" or "Custodian Property Income REIT")
Final results for the year ended 31 March 2023
Custodian Property Income REIT (LSE: CREI), which seeks to deliver an enhanced income return by investing in a diversified portfolio of smaller regional, core/core-plus properties across the UK, today announces its final results for the year ended 31 March 2023.
Commenting on the final results, David Hunter, Chairman of Custodian Property Income REIT, said:
"Our strategy of investing in smaller, regional, core/core-plus property demonstrated its relative resilience and defensive qualities this year as the market corrected to the new interest rate environment, with the Company's portfolio experiencing a 11.8% like-for-like decline in valuations compared to a 17% market decrease.
"Since the year end we are beginning to see some optimism returning to real estate markets following six months of economic turbulence. Valuations appear to have largely stabilised and the Company saw a return to a positive quarterly NAV total return per share in Q4.
"Recurring (EPRA) earnings per share of 5.6p for the year compares to 5.9p in 2022 and 5.6p in 2021. While capital valuations have fluctuated, the underlying occupational property market has remained strong, maintaining relatively stable income returns.
"Capturing rental growth to support earnings is a key focus of the Investment Manager in the coming year. In an inflationary environment and with a lack of supply of modern, smaller regional properties we expect to see continued rental growth. It will be this growth in income that is likely to form the greater component of total return over the next phase of the property market and we believe that Custodian Property Income REIT's strong income yielding portfolio, supported by higher-than-peer group EPRA earnings, will underpin shareholder returns."
For further information, please contact:
Custodian Capital Limited
Richard Shepherd-Cross / Ed Moore / Ian Mattioli MBE Tel: +44 (0)116 240 8740
www.custodiancapital.com
Numis Securities Limited Tel: +44 (0)20 7260 1000
Nathan Brown / Hugh Jonathan www.numiscorp.com
FTI Consulting Tel: +44 (0)20 3727 1000
Richard Sunderland / Andrew Davis / Oliver Parsons custodianreit@fticonsulting.com
Custodian Property Income REIT plc Annual Report and Accounts 2023
Custodian Property Income REIT plc ("Custodian Property Income REIT" or "the Company") 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, core/core-plus properties let to predominantly institutional grade tenants across the UK.
Property highlights
2023
GBPm Comments
Portfolio value 613.6
Property valuation (91.6) Market movements due to rising interest rates and inflation, largely reversing the GBP94.0m of
decreases[1]: gains in the prior year, explained further in the Investment Manager's report
-- GBP15.0m retail park in Nottingham
-- GBP11.1m distribution unit near Glasgow
Property -- GBP8.9m retail warehouses in Droitwich and Measham
acquisitions[2] 52.6 -- GBP7.5m industrial facility in Grangemouth
-- GBP3.6m high street retail units in Winchester
-- GBP3.5m industrial unit in Chesterfield
-- GBP3.0m drive-through restaurants in York
Primarily comprising:
-- GBP3.6m redeveloping an industrial site in Redditch
Capital investment 11.1 -- GBP3.6m refurbishing industrial assets in Avonmouth and Winsford, offices in
Manchester, a retail warehouse in Swindon and a leisure asset in Crewe
-- GBP1.2m invested in electric vehicle chargers and photovoltaics at various sites
Sale proceeds of GBP28.8m at an aggregate 18% premium to valuation comprising:
-- GBP9.3m shopping centre in Gosforth
Profit on disposal -- GBP8.5m industrial unit in Milton Keynes
[3] 4.4 -- GBP5.6m Audi dealership in Derby
-- GBP2.8m business park offices in Leicester
-- GBP1.4m industrial unit in Kilmarnock
-- GBP0.7m high street retail unit in Weston-Super-Mare
-- GBP0.5m high street retail unit in Bury St Edmunds
Financial highlights and performance summary
2023 2022 Comments
Returns
*EPRA[4] earnings per share 5.6p 5.9p Decreased due to increases in interest rates applicable to variable rate
[5] borrowing and professional fee inflation
Basic and diluted earnings (14.9p) 28.5p
per share[6] Loss for the year a result of GBP91.6m valuation decreases caused by market
sentiment around interest rate rises and inflation
(Loss)/profit before tax (GBPm) (65.8) 122.3
Dividends per share[7] 5.5p 5.25p Target dividend per share for the year ended 31 March 2024 of not less
than 5.5p
*Dividend cover[8] 102.2% 110.3% In line with the Company's policy of paying fully covered dividends
*NAV total return per share (12.5%) 28.4% 4.6% dividends paid (2022: 5.8%) and a 17.1% capital decrease (2022: 22.6%
[9] capital increase)
*Share price total return[10] (7.0%) 17.0% Share price decreased from 101.8p to 89.2p during the year
Capital values
NAV and *EPRA NTA[11] (GBPm) 437.6 527.6
Decreased due to GBP91.6m of valuation decreases
NAV per share and *NTA per 99.3p 119.7p
share
*Net gearing[12] 27.4% 19.1% Broadly in line with the Company's 25% target
*Weighted average cost of 3.8% 3.0% Base rate (SONIA) increased from 0.7% to 4.2% during the year
drawn debt facilities
Costs
*Ongoing charges ratio[13] 1.96% 1.94%
("OCR")
Increases in ESG compliance and professional fee inflation
*OCR excluding direct 1.23% 1.20%
property expenses[14]
Environmental
*Weighted average energy performance certificate C C Continued improvements in the environmental performance
("EPC") rating[15] (58) (61) of the portfolio
*Alternative performance measures - the Company reports alternative performance measures ("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 the opportunity to access 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.
The Board also recognises the importance of stakeholder interests 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 strongenvironmental credentials in the right locations which comply with necessary safety regulations;
-- Protects and improves its stable cash flows with long-term planning and decision making, implementing itspolicy of paying sustainable 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 theCompany's impact on climate change and providing the real estate fabric of the economy, giving employers a place ofbusiness.
Investment Policy
The Company's investment policy[16] is summarised below:
-- To invest in a diverse portfolio of UK commercial real estate, principally characterised by individualproperty values of less than GBP15m at acquisition[17].
-- The property portfolio should be diversified by sector, location, tenant and lease term, with a maximumweighting 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.
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