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Custodian REIT PLC emphasises resilience of property sector after ‘a year unlike


“As always when considering real estate investment the location of offices will be key,” said Richard Shepherd-Cross, the managing director of the REIT’s discretionary investment manager

(), the commercial property company, said 91% of rent due was collected in the pandemic-affected 12 months to the end of March 2021.

The real estate investment trust (REIT) issued an update covering the first three months of 2021 in which it revealed 90% of rent (adjusted for contractual rent deferrals) was collected in the period.

Given the uncertainty relating to lockdowns and the Coronavirus pandemic, the board has made “prudent assumptions regarding the collection of deferred and overdue rent and a 5.0% decrease in the annual rent roll”, resulting in earnings per share (EPS) for the full-year sliding to 5.6p from 7.0p the year before.

The board has recommended the payment of a quarterly dividend of 1.25p, unchanged from the preceding quarter, taking the full-year payout to 4.5p versus 6.65p the year before. The full-year dividend has been covered 1.25 times by full-year EPS (as defined by the European Real Estate Association, or EPRA).

The company is targeting a dividend of not less than 5.0p in the current fiscal year.

At the end of March, the property portfolio was valued at £551.9mln, up from £546.8mln at the end of December 2020. Net asset value (NAV) per share rose to 97.6p from 96.4p three months earlier.

The NAV total return per share, which includes dividend payments, for the fiscal year just ended was 0.9% (1.1% the previous year), comprising 5.1% (6.2%) of income and a 4.2% capital decrease (-5.1%).

The EPRA-defined occupancy rate at the end of March stood at 91.5%, compared with 92.3% at the end of December.

“In common with the wider economy the commercial property investment market has experienced a year unlike any other, with office workers deserting their offices, shoppers going online as retailers were obliged to close and pubs and restaurants unable to serve customers for a large part of the year. The government’s moratorium on the eviction of tenants for non-payment of rent has left landlords unable to compel tenants to pay rent, but despite these challenges, I believe real estate investment has been remarkably resilient,” said Richard Shepherd-Cross, the managing director of Custodian Capital, the company’s discretionary investment manager.

“The clear winner in real estate investment has been the industrial and logistics sector which has benefited from the shift from the High Street to ‘E-tailing’ and from the onshoring of the national supply chain post-Brexit. Investment demand and pricing are both at record levels which has been strongly positive for Custodian REIT as this sector makes up 49% of the portfolio, by value, and its valuation increased by 2.6% during the period,” he added.

“The high street retail sector’s future is uncertain, but, I believe as part of a combined retail and leisure-based city centre there will still be active demand from occupiers. Some of the crowds and queues witnessed, notably outside Primark, as non-essential retail re-opened, and outside pubs were testament to the appeal of city-centre locations. The trend for fewer shops was well established prior to the pandemic, but, in core locations, we still expect to see high occupancy levels albeit at rental levels 25-50% below the peak. High Street retail makes up only 8% of the property portfolio by value and we have sold four small shops in the last six months, with another under offer, where we felt a return to rental growth in the medium term was unlikely.

“By contrast, the out of town retail sector, which makes up 18% of the Custodian REIT property portfolio by value, is witnessing investors openly competing for assets. This is a sector where there is confidence that the combination of convenience, lower costs per square foot and the complementary offer to online retail will keep these assets…



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