Custodian REIT PLC (LSE:CREI), the commercial real estate investment trust (REIT) said 95% of rent, excluding contract rent deferrals, was collected in the second quarter.
The company said that despite the extension of legislation granting tenants a moratorium against eviction for non-payment of rent, most tenants have stood by their contractual rental commitments.
Nevertheless, the company increased its provision for doubtful debts by £0.3mln in the period, which contributed to a decline in earning per share for the second quarter to 1.4p from 1.5p in the first quarter.
The occupancy level improved to 92.4% (31 March 2021: 91.5%) through letting four vacant properties during the period.
The investment trust has maintained its quarterly dividend at 1.5p, leaving it on track to hit its full-year target dividend of not less than 5.0p.
The net asset value (NAV) per share rose to 101.7p at the end of June, from 97.6p at the end of March, while the NAV total return per share, which includes dividend payments, was 6.0%, comprising 1.8% dividends and 4.2% share price appreciation.
Net gearing (loan-to-value) at the end of the reporting period had eased to 24.3% from 24.9% at the end of March.
"UK commercial property investment activity in the first half of 2021 has been at levels last seen in the first half of 2018, according to a recent report by Carter Jonas, with over £20bn of investment. Market demand has been focused on the industrial and logistics sector where rising prices continue to indicate record low yields, but demand for office investment is resurgent, with Q2 [second quarter] outstripping Q1 and the retail warehouse market is also showing a sharp recovery in investment activity. Colliers reported £1bn of investment into retail warehousing in the first half of the year and, in common with the office sector, Q2 was stronger than Q1,” said Richard Shepherd-Cross, the managing director of Custodian Capital, the REIT’s discretionary investment manager.
Investment demand in the industrial and logistics sector allied to limited supply and build-cost inflation has resulted in a £02.2mln (7.5%) increase in the property portfolio’s valuation during the period.
In strong regional office locations, where office space is well-matched to occupier demand, rental growth is taking place and many occupiers are starting to plan for post-pandemic working practices, Shepherd-Cross noted.
Demand for retail warehousing available for off low rents is robust despite, or perhaps due to, pandemic-restricted shopping habits, Shepherd-Cross suggested and while challenges remain on the high street, on prime and good secondary high streets, rents are finding a level that can attract occupiers and maintain occupancy.