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Custodian REIT eyes pipeline of opportunities

Snapshot

  • Market valuation up considerably since IPO
  • Annual dividend growth
  • Shares trade at a premium to net assets
  • Gained new largest tenant
Custodian

Quick facts: Custodian REIT

Price: 113.4 GBX

LSE:CREI
Market: LSE
Market Cap: £467.27 m
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What it does

Custodian REIT PLC (LON:CREI) is a real estate investment trust with a portfolio of assets made of industrial, retail, office and other properties.

The company listed on the main market of the London Stock Exchange in 2014.

Since then, its market capitalisation has grown on the back of significant investment into UK regional real estate.

 

 

How’s it doing

In October, Custodian cautioned the retail market was tough but a diversified portfolio was helping to mitigate the challenges.

Overall, its property values declined to £547.2mln as at 30 June, down from £568mln, because of the sale of two properties for £15.7mln.

Its net asset value also shrank by around 1% to 104.3p per share since last year.

The group said earlier in the year that it was facing pressure on retail rents from a flood of company voluntary arrangements or CVAs from high street shops going bust.

Direct retail accounts for just 12% of Custodian’s portfolio and Industrial and office are still going well and offsetting the retail weakness.

For the 2020 financial year ending in March, the company aims to pay a dividend of 6.65p per share.

Custodian also bought eight 'last mile distribution' properties from Menzies Distribution Limited (MDL) for £24.7mln, in a ten year long sale-and-leaseback deal that makes MDL its largest tenant.

It added that it is “considering a pipeline of opportunities”, and championing a selective approach to buck the property market gloom.

 

What the boss says: Richard Shepherd-Cross, MD

"Demand continues for UK commercial property and the attractive income returns on offer.  However, demand is polarised between perceived low risk and perceived higher risk assets.

"Those assets which the market perceives to be lower risk include most industrial properties and properties let on longer leases, particularly those with RPI/CPI indexed rent reviews.”.

 

Video

 

 

Inflexion points

  • Dividend for 2020 forecast at 6.65p
  • Shares trade at a premium to NAV per share of 104.3p
  • That gives a yield of 5.7% at 114.8p
  • Value of portfolio now £547mln

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Watch

Proactive Research analyst discusses Custodian REIT's refinancing and...

Proactive Research analyst Ed Stacey says Custodian REIT (LON:CREI) is continuing to pursue its strategy of low-churn buy-and-hold rental income. In October 2019, Custodian announced the acquisition of a portfolio of eight distribution warehouses under a sale and leaseback deal with Menzies...

on 9/10/19

2 min read