Custodian REIT — Diversified income focus

Custodian Property Income REIT (LSE: CREI)

Last close As at 22/06/2024

GBP0.73

0.70 (0.96%)

Market capitalisation

GBP324m

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Research: Real Estate

Custodian REIT — Diversified income focus

Custodian REIT (CREI) continued to grow its asset base, income earnings, and NAV per share in H118, with a well-controlled cost base. NAV and share price total returns were 4.2% and 5.3%, respectively. We have adjusted our estimates, primarily for property acquisitions and equity issuance since the first quarter, with a positive full year impact on forecast FY19 EPRA EPS (+6.0%) and DPS (+0.8%). Management’s focus is on secure income, to deliver the earnings to cover a sustainable long-term growth in dividends and generate less volatile returns. We believe the 9% premium to FY18e NAV is justified by the conservative gearing and one of the highest dividend yields in the sector.

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Real Estate

Custodian REIT

Diversified income focus

Interim results

Real estate

5 December 2017

Price

116.00p

Market cap

£433m

Net debt (£m) at 30 September 2017

90.4

Net LTV as at 30 September 2017

19.7%

Shares in issue

372.9m

Free float

92%

Code

CREI

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.5)

0.9

8.4

Rel (local)

1.4

1.4

(1.6)

52-week high/low

121.5p

106.0p

Business description

Custodian REIT (CREI) is a London Main Market listed REIT focused on commercial property in the UK outside London. It is income focused, with a commitment to pay a high but sustainable and covered dividend.

Analysts

Martyn King

+44 (0)20 3077 5745

Andrew Mitchell

+44 (0)20 3681 2500

Custodian REIT is a research client of Edison Investment Research Limited

Custodian REIT (CREI) continued to grow its asset base, income earnings, and NAV per share in H118, with a well-controlled cost base. NAV and share price total returns were 4.2% and 5.3%, respectively. We have adjusted our estimates, primarily for property acquisitions and equity issuance since the first quarter, with a positive full year impact on forecast FY19 EPRA EPS (+6.0%) and DPS (+0.8%). Management’s focus is on secure income, to deliver the earnings to cover a sustainable long-term growth in dividends and generate less volatile returns. We believe the 9% premium to FY18e NAV is justified by the conservative gearing and one of the highest dividend yields in the sector.

Year end

Net rental income (£m)

EPRA EPS* (p)

EPRA
NAVPS (p)

DPS
(p)

P/NAV
(x)

Yield
(%)

03/16

18.0

6.80

102

6.25

1.14

5.4

03/17

25.7

6.59

104

6.35

1.11

5.5

03/18e

32.1

6.81

106

6.45

1.09

5.6

03/19e

35.4

7.30

109

6.55

1.06

5.6

Note: *EPRA EPS excludes revaluation gains/losses and other exceptional items.

H118 results: Income and NAV growth

H118 EPRA earnings of £12.0m or EPS of 3.4p compared with 3.0p per share in H117 and DPS paid in the period under review of 3.2p. IFRS earnings of £13.2m or EPS of 3.8p (H117: 3.0p) included net gains on investment properties of £1.3m. After dividends paid, NAV per share increased 1.1p to 104.9p compared with end-FY17, representing a 4.2% NAV total return in the six-month period. The portfolio value increased c 13% from end-FY17 to £474.3m, including 12 acquisitions for an aggregate consideration of £56.1m at an average 6.8% net initial yield. Three non-core assets were sold for an aggregate £6.1m, generating a gain of c £1m.

Income focused strategy

CREI has built a balanced portfolio of regional UK commercial real estate, diversified by sector, location, tenant and lease term. It is focused on lot sizes of less than £10m, where CREI believes it has a competitive advantage. It has low exposure to offices, a relatively high exposure to industrial, alternative sectors, and increasingly retail warehousing, plus its portfolio is institutional quality in all but lot size. Management focus is on maintaining high levels of occupancy and growing income through rental growth and accretive acquisitions. Dividends paid since IPO in March 2014 represent c 75% of the total return.

Valuation: Yield premium supports P/NAV

CREI’s 5.6% prospective yield, with dividends fully covered by earnings, places it towards the top of a broad universe of property investment companies and REITs. This provides support for the P/NAV ratio, which at 1.09x is also above average. The manager’s ability to source accretive acquisitions, the opportunities to actively manage the existing portfolio, and the prospect of continuing rental growth all suggest upside in income returns with further potential for capital growth.

Company description: Diversified income focus

Custodian REIT is a Main Market listed REIT focused on UK commercial property outside of London with a target lot size of sub-£10m. It is income focused, with the potential for capital growth and is committed to paying a high, sustainable, covered dividend while maintaining a conservative level of gearing. It is managed by Custodian Capital, a property management and investment business, regulated by the FCA. Custodian Capital is a subsidiary of Mattioli Woods, a specialist wealth management and employee benefits consultant, with £7.8bn of assets under management or advice as at May 2017. CREI listed in March 2014 and originates from syndicated funds, managed on behalf of Mattioli Woods clients by Custodian Capital over a 12-year period. These funds provided a seed portfolio of £95m to which the IPO proceeds added £55m. Subsequent placings have seen the market capitalisation increase to the current c £426m.

Exhibit 1: Portfolio sector split by income as at 1 November 2017

Exhibit 2: Portfolio regional split by income as at 1 November 2017

Source: Custodian REIT Factsheet November 2017

Source: Custodian REIT Factsheet November 2017

Exhibit 1: Portfolio sector split by income as at 1 November 2017

Source: Custodian REIT Factsheet November 2017

Exhibit 2: Portfolio regional split by income as at 1 November 2017

Source: Custodian REIT Factsheet November 2017

Including properties acquired since end-H118, the diversified portfolio comprises 144 properties, let to more than 275 different tenants, and spread across the UK with a value that is approaching £500m. It includes investments in all of the main commercial sectors: office, retail, industrial and distribution, as well as a range of alternatives, including leisure, car showrooms, trade counters and day nurseries.

Despite targeting smaller lot sizes where competition for assets can be lower, especially competition from larger investors, CREI seeks quality properties, which it describes as institutional grade, that it expects to maintain above average occupancy and income levels over the longer term.

Highlights of the FY18 interim results

We briefly review the highlights of the FY18 interim results below as many of the key numbers have previously been reported in the company’s monthly Factsheets. The period saw continued growth in the income generating asset base, substantially funded by ongoing equity issuance at a premium to NAV, with a conservative level of gearing maintained. 12 properties were acquired during H118 at an average net initial yield of c 6.8%, well above funding costs. Meanwhile, the changes to the management fee structure announced in June enhance the opportunity to benefit from scale economies. Ongoing charges during the period were c 1.2%, similar to FY17. Occupational demand remains healthy, supporting rental growth and low vacancy rates across the portfolio.

Exhibit 3: H118 financial summary and comparison

£000s unless otherwise stated

H118

H117

FY17

Net rental income

15,667

11,416

25,741

Administrative expenses

(2,100)

(1,726)

(3,643)

Operating profit before revaluations

13,567

9,690

22,098

Revaluation of investment properties

3,747

3,502

9,016

Costs of acquisitions

(3,452)

(3,759)

(6,103)

Profit on disposal

979

128

1,599

Operating profit

14,841

9,561

26,610

Net Interest

(1,610)

(1,266)

(2,405)

Profit before tax

13,231

8,295

24,205

Taxation

0

0

0

Profit after tax

13,231

8,295

24,205

EPRA earnings

11,957

8,424

19,693

IFRS EPS (p)

3.8

3.0

8.1

EPRA EPS (p)

3.4

3.0

6.6

DPS (declared) (p)

3.225

3.175

6.350

IFRA & EPRA NAV per share (p)

104.9

101.7

103.8

NAV total return

4.2%

3.3%

8.5%

Net LTV

19.7%

21.0%

14.4%

Source: Custodian REIT data

The financial highlights of H118 were:

IFRS earnings of £13.2m or 3.8p per share were 60% higher than the level reported in the prior year period and included £3.7m of gross revaluation gains and £1.0m of gains on disposal of three non-core properties in the half, substantially offset by the costs related to property acquisitions in the period.

On an EPRA basis, excluding revaluation and disposal gains and acquisition costs, earnings were £12.0m or 3.4p per share, 42% higher than in H117 and 6% above the level of H217.

Two quarterly dividends of 3.2p in aggregate were paid during the period and a dividend of 1.6125p was declared in respect of the quarter ending 30 September for payment on 30 November.

NAV per share (both IFRS and EPRA) was 104.9p as at 30 September, an increase of 1.1p or just over 1% from end-FY17.

The growth in NAV per share taken together with dividends per share generated a 4.2% NAV total return during the six-month period.

£56.1m was invested in 12 acquisitions during the period, before £3.4m in acquisition costs. Three non-core assets were sold with an aggregate consideration of £6.1m, c 20% above book value.

To satisfy continued investor demand and part-fund continuing acquisitions, a total of 21.8m new shares were issued under the block listing facility, generating proceeds of £24.8m before expenses of £0.3m. The average issue price of 113.6p represents an 11% premium to the weighted average dividend adjusted NAV.

Gross balance sheet debt was £98.5m at 30 September 2017, and taking into account unrestricted cash and equivalent balances and unamortised debt issuance costs the net loan to value ratio (LTV) was 19.7%.

CREI remains focused on maintaining and enhancing cash flow from the portfolio to support its objectives to pay fully covered dividends and secure sustainable growth. It believes that rental growth in regional markets will be a key driver of the company's performance, which it seeks to enhance through the deployment of new debt and equity and continued asset management of the portfolio. 

Occupational demand remains healthy, supporting rental growth and occupancy across the portfolio. The manager sees no signs of an oversupply of property in the occupational market and observes that with a continued low level of development it is tightness of supply rather than excessive demand that is driving rental growth. Rental levels in many regional markets, it is argued, remain too low to bring forward material new development, which is a positive indicator for continued rental growth and should better insulate the market from potential shocks compared with previous rental growth cycles. In this environment, CREI sees continuing opportunities to invest. Competition for assets remains strong, requiring a disciplined approach to acquisitions, but with the interim results CREI said that it had agreed terms on £18.9m of properties and was considering an active pipeline of new acquisition opportunities as vendors prepare to conclude sales prior to the end of 2017. It has subsequently announced the acquisition of a retail asset in Worcester for a consideration of £5.54m.

Although the commercial property market is cyclical, the company believes that its strategy of securing sustainable income will support future dividends through any medium-term market volatility and deliver capital growth for shareholders over the long term despite the potential for cyclical impacts on NAV along the way.

In the following section we provide an update on the portfolio and operational performance.

Portfolio update: Growing in smaller lot sizes

Excluding the recent acquisitions, the portfolio was valued at £474.3m at the end of September 2017, consisting of 141 properties, let to 206 tenants, accounting for 255 individual tenancies. Income-based occupancy was 96.7% at 30 September with a weighted average unexpired lease term to first break (WAULT) of 5.75 years. The annualised rent potential was £35.4m. Since the period end, CREI has added a further three properties for an aggregate consideration of c £19.2m before acquisition costs, taking to the total portfolio size to close to £500m and adding c £1.4m in annualised rental income.

The 12 assets added to the portfolio in H118 are listed in Exhibit 4, along with the three assets that have been added since the period end. The aggregate H118 consideration of £56.1m, before costs of acquisition and adjusted for rent-free top-ups, represents an average net initial yield of c 6.8%.

Exhibit 4: Transaction activity year-to-date

PURCHASES

Location

Date

Type

Value (£m)

Annual rent (£m)

Net initial yield

Gloucester

02-May

Retail warehouse

4.7

0.37

7.41%

York

12-May

Other

3.9

0.24

5.75%

Galashiels

15-May

Retail warehouse

3.1

0.28

8.24%

Plymouth

15-May

Retail warehouse

7.5

0.54

6.74%

Langley Mill

12-Jun

Industrial

2.2

0.14

6.29%

Eurocentral Scotland

15-Jun

Industrial

4.8

0.35

6.91%

Sheldon, Birmingham

19-Jun

Retail warehouse

5.1

0.36

6.64%

Total Q118

31.3

2.28

6.85%

Stockport

18-Jul

Other

8.8

0.66

6.99%

Ashton-under-Lyne

26-Jul

Retail warehouse

6.6

0.42

6.00%

Salisbury

28-Jul

Other

2.8

0.20

6.75%

Plymouth

07-Sep

Retail warehouse

5.5

0.40

6.79%

Livingston

03-Oct

Industrial

2.6

0.21

7.50%

Total Q218

26.3

1.89

6.72%

Total H118

57.6*

4.17

6.79%

Burton-Upon-Trent

05-Oct

Retail warehouse

8.5

0.58

6.45%

Cardiff

05-Oct

High street retail

5.2

0.41

7.46%

Worcester

24-Nov

High street retail

5.5

0.38

6.50%

Q318 to date

19.2

1.37

6.74%

FY18 year to date

76.8

5.54

6.78%

SALES

Location

Date

Type

Value (£m)

Gain on disposal (£m)

Book value

Colchester

18-Sep

Retail

4.25

0.7

3.55

Redcar

18-Sep

Retail

0.60

0.1

0.50

Phoenix Park

18-Sep

Industrial

1.20

0.2

1.00

FY18 year to date

6.05

1.0

5.05

Source: Custodian REIT data. Note: The consideration for acquisitions is shown before adjustment for £1.5m in rent-free top-ups. Adjusted for this, the aggregate consideration in H118 was £56.1m.

The like-for-like portfolio valuation increase was c £3.7m (0.9% of the opening value), although this was substantially offset by c £3.4m of costs related to the properties acquired in the period, equivalent to an average 6.2% of the consideration. The strongest underlying gains were seen in industrial and retail warehouse properties. Asset management initiatives generated £1.7m of the £3.7m valuation uplift.

Exhibit 5: Summary of revaluation movement and acquisition costs

Sector

Period end valuation (£m)

Gross valuation movement (£m)

Like for like valuation movement (%)

Acquisition costs (£m)

Industrial

202.1

4.6

2.3%

(0.6)

Retail Warehouse

80.2

1.3

1.9%

(1.8)

Other

73.3

0.0

0.0%

(1.0)

High Street retail

66.2

(1.9)

-2.6%

0.0

Office

52.5

(0.3)

-0.5%

0.0

Portfolio total

474.3

3.7

(3.4)

Source: Custodian REIT data

The diverse nature of the portfolio, both by asset type and by geography, is shown in Exhibits 1 and 2. Exposure to office properties remains relatively low, reflecting the manager’s view that pricing often underestimates the rate of obsolescence. The strong existing exposure to industrial properties was beneficial during H118 and valuations in retail warehousing, the main area where exposure has been increasing, were also positive. Retail warehouse acquisitions represented £32.6m or 58% of the H118 total and the retail warehouse weight in the overall portfolio increased from 11% to 16%, and has increased further since period end. Retail warehousing vacancy rates are close to historical lows with development activity constrained by restricted planning policy among other factors, while retailers continue to target larger format stores, easy parking, and “click and collect” capability.

Financials

Our revised forecasts are shown in Exhibit 6. The main change is to incorporate the acquisitions and equity raising that has taken place since we last updated our forecasts, to which we have added an additional £10m of “notional” acquisitions from the acquisition pipeline, at a net initial yield of 6.8%, utilising already drawn debt facilities.

Our revenue forecasts previously included the seven Q118 acquisitions (£31.28m in consideration) shown in Exhibit 4. We now include the five additional acquisitions completed in Q218 (c £26.3m aggregate consideration and c £1.9m in annual rental income), the three acquisitions announced since period end (c £19.2m in consideration and c £1.4m in annual rental income), the three disposals discussed above (all made in Q218) and the notional further acquisitions.

We have also adjusted for the 26.34m new shares issued since end-Q118 under the block listing facility, generating proceeds of £30.2m at an average issue price of 114.5p per share.

Exhibit 6: Forecast revisions

Net rental income (£m)

EPRA EPS (p)

DPS (p)

EPRA NAV/share (p)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

03/18e

30.6

32.1

4.7

6.95

6.81

-2.0

6.45

6.45

0.0

106

106

-0.3

03/19e

31.2

35.4

13.2

6.89

7.30

6.0

6.50

6.55

0.8

109

109

0.0

Source: Edison Investment Research

Our forecast net rental income increases by 4.7% in the current year and a larger 13.2% in FY19 as the acquired properties make a full year impact. The rental income increase in the current year (see below) is slightly more than offset by a revision to our forecast for interest costs, largely because the £35m of debt that was drawn in April of this year had a greater impact on average borrowing than we had allowed for in our modelling. Looking ahead, CREI has recently drawn an additional £15m in debt, the cost of which is included within next year’s forecast, although the proceeds are yet to be fully committed to income generating assets. The notional acquisitions assumed avoid a drag from unspent cash on earnings, an unlikely outcome given management’s pipeline of acquisition opportunities under offer.

Our FY19 EPRA EPS forecast increases to 7.30p leading us to raise our DPS expectation to 6.55p per share, a 90% pay-out of EPRA earnings, and growth of 1.6%.

With the interim results, CREI commented that it had c £57m in available funds to deploy on property acquisition opportunities as at 30 September 2017. This consisted of £7m in uncommitted cash and undrawn borrowing facilities of £50m. The £15m debt drawdown in early November represents the second tranche of a £50m 15-year fixed rate facility agreed in April 2017. In addition, CREI has a £35m revolving credit facility (RCF), which remains undrawn. Allowing for subsequent acquisitions and equity issuance, we estimate that c £47m of available funds remain, of which we have allocated just £10m to the notional acquisitions included in our forecasts.

CREI targets a conservative level of gearing and a net LTV of 25%. At 30 September it was 19.7% and the company recently indicated a level of 20.2%, which allows for recent acquisitions and equity issuance. The weighted average maturity of all of CREI’s agreed debt facilities is 10 years, with a 77% fixed rate, and the average cost is 3.1%.

Valuation

For the current financial year, CREI is targeting an aggregate annual DPS of 6.45p, paid in equal quarterly instalments, fully covered by earnings. This represents a dividend yield of 5.6%, covered 104% by our EPRA EPS forecast.

During the three and half years since listing (March 2014), CREI has paid 19.4625p in dividends in aggregate and has increased EPRA NAV per share from 98.2p at listing to 104.9p at 30 September 2017. This represents an aggregate total return of 26.6% over the period, or an annualised total return of 7.0%.

Exhibit 7: NAV total return

Opening NAV per share (p)

FY15

FY16

FY17

H118

FY15 -H118

Dividends paid per share (p)

98.2

101.3

101.5

103.8

98.2

Closing NAV per share (p)

3.75

6.0875

6.425

3.2

19.4625

Total return in period

101.3

101.5

103.8

104.9

104.9

7.0%

6.2%

8.6%

4.20%

26.6%

Source: Company data

The focus on income is clear, with dividends paid representing 75% of the total return since IPO. Management’s strategy is aimed at sustainably growing fully covered DPS and our forecasts for FY19 look for a 3.1% increase to 6.65p per share, 90% of forecast EPRA EPS. Although the commercial property market as a whole has historically displayed significant volatility in returns, and is likely to do so again in the future, income returns have proven to be considerably more stable than capital values. It is this relative consistency of income returns, backed by high levels of occupancy, that CREI is targeting.

Turning to a comparison of CREI with other listed property vehicles, Exhibits 8 and 9 show prospective dividend yields and historical P/NAV ratios for a broad universe of property investment companies and REITs. This universe is quite diverse, including specialist investors such as the healthcare property REITs and others focused on long duration income streams, as well as a range of companies with more mainstream commercial portfolios and varying degrees of focuses on income and capital growth. There is no significant correlation between this yield and P/NAV data, although it is reasonable to believe that those companies that are expected to offer the most attractive returns over time (a combination of both dividend income and capital returns) are likely to command a higher P/NAV.

CREI’s prospective dividend yield places it towards the top of this broad group, and this provides support to the P/NAV ratio, which at 1.09x is also above average. The manager’s ability to continue to secure accretive asset acquisitions, the opportunities to actively manage the existing portfolio, and the prospect of continuing rental growth all suggest that CREI should be able to continue to grow income returns, with further potential for capital growth.

Exhibit 8: Universe by prospective dividend yield

Source: Bloomberg, Edison Investment Research. Note: Data as at 4 December 2017.

Exhibit 9: Universe by P/NAV

Source: Bloomberg, Edison Investment Research. Note: Data as at 4 December 2017.

Given the broad diversity of the investment vehicles shown in Exhibits 8 and 9, in the following table we show a sub-set of data for those companies that we think should be considered as the closest comparators to CREI. A similar picture emerges with CREI providing a higher than average yield and commanding a higher than average P/NAV.

Exhibit 10: Peer comparison

Price (p)

Market cap
(£m)

NAVPS (p)

DPS (p)

P/NAV (x)

Yield (%)

EPIC

114

149

111.3

5.50

1.02

4.8%

F&C Commercial Property

140

1,119

139.4

6.00

1.00

4.3%

F&C UK Real Estate Investments

104

249

100.1

5.00

1.03

4.8%

Picton Property Income

85

458

85.9

3.43

0.99

4.0%

Regional REIT

105

112

107.3

7.85

0.98

7.5%

Schroders REIT

60

312

65.7

2.48

0.92

4.1%

Standard Life Investment Property

91

355

86.0

4.76

1.05

5.3%

Tritax Big Box

143

1,953

133.3

6.40

1.08

4.5%

UK Commercial Property Trust

88

1,147

90.4

3.68

0.98

4.2%

Average

651

1.00

4.8%

Custodian REIT

115

430

104.9

6.45

1.10

5.6%

Source: Bloomberg, Edison Investment Research. Note: Data as at 4 December 2017. NAVPS data as last reported by companies.

Exhibit 11: Financial summary

Year end 31 March

£000s

2015

2016

2017

2018e

2019e

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Gross rental income

11,228

18,561

26,980

33,170

36,850

Re-charge income

342

451

630

673

765

Total revenue

 

 

 

11,570

19,012

27,610

33,842

37,615

Gross property expenses

(715)

(1,023)

(1,869)

(1,773)

(2,239)

Net rental income

 

 

 

10,855

17,989

25,741

32,069

35,376

Administrative expenses

(2,327)

(2,828)

(3,643)

(4,242)

(4,403)

Operating Profit before revaluations

 

 

 

8,528

15,161

22,098

27,828

30,973

Revaluation of investment properties

6,083

3,031

9,016

8,247

9,500

Costs of acquisitions

(5,844)

(5,768)

(6,103)

(5,347)

0

Profit on disposal

269

56

1,599

979

0

Operating Profit

9,036

12,480

26,610

31,707

40,473

Net Interest

(289)

(1,273)

(2,405)

(3,365)

(3,750)

Profit Before Tax

 

 

 

8,747

11,207

24,205

28,342

36,723

Taxation

(2)

0

0

0

0

Profit After Tax

8,745

11,207

24,205

28,342

36,723

Net revaluation of investment property/costs of acquisition

(239)

2,737

(2,913)

(2,900)

(9,500)

Gains/(losses) on disposal

(269)

(56)

(1,599)

(979)

0

Profit After Tax (EPRA)

8,237

13,888

19,693

24,463

27,223

Average Number of Shares Outstanding (m)

146.1

204.2

298.7

359.3

372.9

IFRS EPS (p)

 

 

 

5.99

5.49

8.10

7.89

9.85

EPRA EPS (p)

 

 

 

5.64

6.80

6.59

6.81

7.30

Dividend per share (p)

 

 

 

5.25

6.25

6.35

6.45

6.55

Pay-out ratio of EPRA EPS

0.93

0.92

0.96

0.95

0.90

BALANCE SHEET

Fixed Assets

 

 

 

207,287

318,966

415,812

507,968

517,468

Investment properties

207,287

318,966

415,812

507,968

517,468

Other non-current assets

0

0

0

0

0

Current Assets

 

 

 

1,921

9,973

12,996

15,473

19,549

Debtors

1,072

4,518

7,189

4,711

5,099

Cash

849

5,455

5,807

10,761

14,449

Current Liabilities

 

 

 

(5,411)

(8,165)

(12,572)

(13,925)

(14,560)

Creditors/Deferred income

(5,411)

(8,165)

(12,572)

(13,925)

(14,560)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

 

(23,811)

(65,714)

(64,359)

(114,153)

(114,373)

Long term borrowings

(23,811)

(65,143)

(63,788)

(113,582)

(113,802)

Other long term liabilities

0

(571)

(571)

(571)

(571)

Net Assets

 

 

 

179,986

255,060

351,877

395,362

408,083

NAV/share (p)

101

102

104

106

109

EPRA NAV/share (p)

101

102

104

106

109

CASH FLOW

Operating Cash Flow

 

 

 

12,780

13,945

23,066

28,173

31,220

Net Interest

(204)

(1,285)

(2,200)

(3,207)

(3,530)

Tax

0

0

0

0

0

Acquisition/disposal of investment property

(129,788)

(113,621)

(92,126)

(84,577)

0

Ordinary dividends paid

(5,546)

(12,220)

(18,493)

(22,870)

(24,002)

Debt drawn/(repaid)

23,811

41,700

(1,000)

49,423

0

Proceeds from shares issued (net of costs)

99,796

76,087

91,105

38,013

0

Other cash flow from financing activities

Net Cash Flow

849

4,606

352

4,954

3,688

Opening cash

0

849

5,455

5,807

10,761

Closing cash

 

 

 

849

5,455

5,807

10,761

14,449

Debt

(23,811)

(65,143)

(63,788)

(113,582)

(113,802)

Closing net debt

 

 

 

(22,962)

(59,688)

(57,981)

(102,821)

(99,353)

Net LTV

11.4%

19.1%

14.4%

20.8%

19.7%

Source: Company data, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Custodian REIT and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Limited (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Custodian REIT and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Limited (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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