Custodian REIT Plc – Unaudited Net Asset Value as at 31 March 2020 and COVID-19 update

Custodian REIT plc

(“Custodian REIT” or “the Company”)

Unaudited Net Asset Value as at 31 March 2020 and COVID-19 update

Custodian REIT (LSE: CREI), the UK commercial real estate investment company, today reports its unaudited net asset value (“NAV”) as at 31 March 2020, highlights for the period from 1 January 2020 to 31 March 2020 (“the Period”) and an update on the impact of the COVID-19 pandemic.

The Company's focus is on managing liquidity to mitigate the risks associated with COVID-19 disruption and maintaining a level of income for investors broadly linked to net rental receipts.

Financial highlights

• NAV total return per share1 for the year ended 31 March 2020 (“FY20”) of 1.1% (year ended 31 March 2019 (“FY19”): 5.9%), comprising 6.2% income (FY19: 6.1%) and a 5.1% capital decrease (FY19: 0.2% capital decrease)
• NAV per share of 101.6p (31 December 2019: 104.4p)
• NAV of £426.7m (31 December 2019: £430.2m)
• FY20 EPRA earnings per share2 7.0p (FY19: 7.3p)
• Dividend per share approved for the Period of 1.6625p payable on 29 May 2020
• FY20 dividends paid and approved of 6.65p (FY19: 6.55p)
• Net gearing3 of 22.4% loan-to-value (31 December 2019: 23.2%) comprising cash of £25m and borrowings of £150m
• £9.1m of new equity raised during the Period at an average premium of 10.6% to dividend adjusted NAV per share
• Market capitalisation of £415.9m (31 December 2019: £469.7m)

Portfolio highlights

• Property value of £559.8m (31 December 2019: £571.2m), subject to a 'material uncertainty' clause in line with prevailing RICS guidance
• £12.5m aggregate valuation decrease (2.2% of property portfolio) for the Period, comprising a £2.9m valuation increase from successful asset management initiatives and £15.4m decreases due primarily to the impact of COVID-19 on retail and alternative sectors
• EPRA occupancy4 95.9% (31 December 2019: 95.6%)

1 NAV per share movement including dividends paid and approved for the period.

2 Profit after tax excluding net gains on investment property divided by weighted average number of shares in issue.

3 Gross borrowings less cash (excluding rent deposits) divided by portfolio valuation.

4 Estimated rental value (“ERV”) of let property divided by total portfolio ERV.

Net asset value

The unaudited NAV of the Company at 31 March 2020 was £426.7m, reflecting approximately 101.6p per share, a decrease of 2.8p (2.7%) since 31 December 2019:

5 Dividends of 1.6625p per share relating to the quarter ended 31 December 2019 were paid on shares in issue throughout the Period.

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 31 March 2020, which is subject to a 'material uncertainty' clause in line with RICS guidance, and income for the Period, but does not include any provision for the approved dividend of 1.6625p per share for the Period to be paid on 29 May 2020.

COVID-19 impact

Commenting on the impact of COVID-19, Richard Shepherd-Cross, Managing Director of Custodian Capital Limited (the Company's discretionary investment manager) said:

“The Period started with increased confidence in commercial property investment following the General Election and reduced uncertainty around Brexit.  Sadly, all talk of confidence has now been eclipsed by the COVID-19 pandemic and the widespread impact on the economy in this country and globally.

“Our response has been to prioritise protecting cash flow and to secure the balance sheet.  As a result the Company has withdrawn from two acquisitions of regional offices on which terms had been agreed.  In addition, to address the impact of the statutory protections for commercial tenants introduced by the UK Government, the Company has agreement in principle from its lenders to put in place pre-emptive covenant waivers on interest cover6 to provide the flexibility to collect rent in the most advantageous way for medium/long-term income security, while supporting tenants and minimising vacancies.

“It is too early to assess the long-term impact of COVID-19 on the commercial property market but we believe it may accelerate pre-existing trends in the use of, and investment in, commercial property.  We expect to see a further deterioration in secondary retail, an increase in demand for flexible office space (both traditional offices, fitted out and leased flexibly, as well as serviced offices) and a continuation of the growth of logistics and distribution.  As always, we would expect location to be a key determinant of the future success of commercial property assets.

“In the near-term, of even more importance than the NAV derived from current valuations is the absolute focus on rent collection, future cash flow, ongoing asset management and the affordability of future dividends which are all underpinned by the Company's low ongoing charges ratio7 of 1.12% and low cost of debt of 3.0% (circa £4.7m interest per annum in aggregate).”