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Custodian REIT says property yields at highest ever relative to gilts

Published: 08:11 23 Jun 2020 BST

Custodian REIT -

Custodian REIT PLC (LON:CREI) said property yield currently stand at the highest premium ever to government bonds as it reported its full-year results to March.

"Property yields are currently showing a circa 6% margin over UK 10-year gilts, which is the widest margin on record," said David Hunter, the REIT’s chairman.

“In expectation of continued low gilt rates this margin is likely to support real estate pricing despite a recent decline in capital values,” he added.

The impact of coronavirus on Custodian became fully apparent in the fourth quarter of the trading year to March, it said. 

The final three months saw a £12.5mln (2.2%) decrease in the value of its properties, said the property investment trust.

Around 70% of rent has been collected for the current quarter to June, it added.

Net asset value (NAV) at the end of March was 101.6p or £426.7m, a decrease of 5.5p (5.1%) from the same time a year ago.

Hunter added: “In the year ended 31 March 2020 Custodian REIT delivered a NAV per share total return of 1.1% (2019: 5.9%) with dividends of 6.65p per share supporting a positive NAV total return despite the impact of the COVID-19 pandemic on valuations in the final quarter.

"The outlook for real estate investment is likely to become clearer and potentially more positive as lockdown eases and most sectors of the economy have the opportunity to re-open."

Even so, Custodian has more than halved its target payout for the current six months to not less than 1.5p (3.35p).

Hunter added: "Real estate is likely to remain a key asset for investors looking for income and as rent collection stabilises and deferred rents are recovered, the ability to pay dividends at more meaningful levels will return.”

 

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