Custodian REIT — Fifth interim payment continues DPS recovery

Custodian Property Income REIT (LSE: CREI)

Last close As at 20/06/2024

GBP0.73

0.70 (0.96%)

Market capitalisation

GBP324m

More on this equity

Research: Real Estate

Custodian REIT — Fifth interim payment continues DPS recovery

Custodian REIT (CREI) generated a 2.5% NAV total return in Q421, taking the H221 total to 4.9% and FY21 to a positive 0.9% despite pandemic-driven weakness earlier in the year. H221 returns were supported by improving rent collection, delivering increased DPS (including a fifth interim payment), and positive net valuation gains, primarily driven by a strong (49%) industrial asset weighting and asset management initiatives.

Martyn King

Written by

Martyn King

Director, Financials

Real Estate

Custodian REIT

Fifth interim payment continues DPS recovery

Q421 NAV update

Real estate

17 May 2021

Price

98p

Market cap

£412m

Net debt (£m) as at 31 March 2021

133.0

Net LTV as at 31 March 2021

24.9%

Shares in issue

420.1m

Free float

92%

Code

CREI

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.7

7.5

18.9

Rel (local)

2.0

1.8

(2.8)

52-week high/low

104p

76p

Business description

Custodian REIT 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, with the potential for capital growth.

Next events

Q421 DPS payment

28 May 2021

FY21 results

Expected June 2021

Analyst

Martyn King

+44 (0)20 3077 5745

Custodian REIT is a research client of Edison Investment Research Limited

Custodian REIT (CREI) generated a 2.5% NAV total return in Q421, taking the H221 total to 4.9% and FY21 to a positive 0.9% despite pandemic-driven weakness earlier in the year. H221 returns were supported by improving rent collection, delivering increased DPS (including a fifth interim payment), and positive net valuation gains, primarily driven by a strong (49%) industrial asset weighting and asset management initiatives.

Year end

Net rental
income (£m)

EPRA
earnings* (£m)

EPRA
EPS* (p)

EPRA NAV/ share (p)

DPS
(p)

P/NAV
(x)

Yield
(%)

03/19

37.6

28.5

7.3

107.1

6.55

0.91

6.7

03/20

38.1

28.7

7.0

101.6

6.65

0.96

6.8

03/21e

36.9

23.7

5.6

97.6

5.00

1.00

5.1

03/22e

36.2

25.7

6.1

98.4

5.60

1.00

5.7

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

Improving rent collection and capital values

EPRA NAV has increased in each of the last two quarters (Q421: 97.6p), even as DPS has also increased. EPRA NAV total return has been positive in each of the last three quarters. DPS increased in both Q221 and Q321 and with rent collection strengthening (to reach c 91% for FY21 the year including c 3% of agreed rent deferrals), an unchanged Q421 DPS of 1.25p was declared and a fifth interim DPS of 0.5p, taking aggregate FY21 DPS to 5.0p. FY21 DPS was fully covered by net cash receipts and c 113% covered by EPRA EPS of 5.6p, and CREI is targeting quarterly payments of at least 1.25p for FY22 (aggregate DPS of 5.0p). Our forecasts for FY22 EPRA EPS and DPS (5.6p) are unchanged and a higher FY21 EPRA NAV than we had forecast feeds through to a c 3% increase in FY22e EPRA NAV. We have introduced a tentative FY23 forecast, anticipating further progress.

Positive indicators for further improvement

CREI enters the current year with a reduced annualised contracted rent roll compared with FY21 but, while the outlook remains uncertain, the current lockdown easing indicates an improved outlook for rent collection and the prospect of reduced receivable provisions and/or recoveries. The targeted minimum 5.0p DPS for FY22 is based on rent collection remaining in line with CREI’s expectations. Rent roll reduced by £2.1m (5%) due to lease expiries and tenant failures, and occupancy reduced to 91.5% (FY20: 95.9%). Absent further tenant failures, CREI expects occupancy to increase over the next three to six months. End-year gearing remains moderate with a net LTV of 24.9% and recent demand for the shares, reflected in a premium to NAV, has allowed modest share issuance under the company’s tap facility. This may provide headroom for accretive acquisitions.

Valuation: Consistent income return focus

The minimum 5.0p DPS targeted by CREI for FY22 represents an attractive yield of 5.1%, and our forecast DPS of 5.6p represents a yield of 5.7%. Both are a significant premium to risk-free rates (10-year UK government debt c 0.8%). Despite the pandemic, NAV total return has remained positive on an annual basis, driven by an unbroken pattern of quarterly DPS payments, albeit at a reduced level.

Recovery continued through Q421

The unaudited net asset value at 31 March 2021 (end-FY21) was £409.9m (end-FY20: £426.7m) or 97.6p per share. NAV per share has increased for each of the past two quarters, with property valuations recovering some of the H121 unrealised losses and despite an increase in the quarterly DPS paid in Q421 (and relating to Q321).

Exhibit 1: Quarterly NAV per share development through FY21

Pence per share (p)

Q121

Q221

Q321

Q421

FY21

Opening NAV

101.6

95.7

95.2

96.4

101.6

Movement in property values

(5.6)

(0.7)

0.8

0.9

(4.6)

o/w profit/(loss) on disposal

0.1

0.0

0.0

0.0

0.1

o/w asset management

0.0

0.7

1.0

0.6

2.3

o/w other valuation movement

(5.7)

(1.4)

0.0

0.3

(6.8)

o/w acquisition costs

0.0

0.0

(0.2)

0.0

(0.2)

EPRA earnings

1.4

1.2

1.4

1.6

5.6

Dividends paid

(1.7)

(1.0)

(1.0)

(1.3)

(5.0)

Closing NAV

95.7

95.2

96.4

97.6

97.6

Source: Custodian REIT

Combining the movement in NAV with dividends paid, NAV total returns have been positive in each of the past three quarters and were positive for the year, driven entirely by income returns.

Exhibit 2: Quarterly NAV total returns*

Q121

Q221

Q321

Q421

FY21

Opening NAV per share (p)

101.6

95.7

95.2

96.4

101.6

Closing NAV per share (p)

95.7

95.2

96.4

97.6

97.6

DPS paid (p)

1.6625

0.9500

1.0500

1.2500

4.9

NAV total return

-4.2%

0.5%

2.4%

2.5%

0.9%

Source: Custodian REIT data, Edison Investment Research. Note: *Dividends added back but not reinvested

Unaudited EPRA earnings were c £23.8m (FY20: £28.7m) or 5.6p per share (FY20: 7.0p). The reduction in EPRA earnings reflects:

a £2.7m (0.6p per share) increase in provisions against rent receivables; and

a £2.1m (5.0%) decrease in annual rent roll during the year, due to existing tenants exiting at lease expiry (2.6%), cessation of rents due to company voluntary arrangements (CVAs) and administration (3.2%), partly offset by acquisitions (0.8%). Continuing rent growth in industrial sector assets offset decreases in other sectors.

Including both the Q421 DPS of 1.25p declared for payment on 28 May 2021 and the fifth interim DPS of 0.5p declared for payment on 30 June 2021, aggregate DPS declared in respect of FY21 was 5.0p (FY20: 6.65p). Aggregate DPS was 113% covered by EPRA EPS of 5.6p (FY20: 7.0p) and fully covered by net cash receipts, in line with the current policy of paying dividends at a level that is broadly linked to net rental receipts. For FY22, the board has set a target for aggregate dividends of not less than 5.0p, primarily subject to rent collection remaining in line with expectations. On a longer-term basis, the policy remains to grow dividends on a sustainable basis, at a rate that is fully covered by projected net rental income while maintaining investment flexibility. We continue to forecast aggregate FY22 DPS of 5.6p, above the targeted minimum.

Rent collection

As of 4 May 2021, of the £36.9m of contracted cash rental income for FY21 (ie rental income adjusted for non-cash IFRS smoothing adjustments of £1.9m), c 89% had been collected in cash (some after the year-end) and, including the outstanding balances of agreed short-term rent deferrals, this increases to 91%. Applied to the sector mix of the portfolio (Exhibit 3) we consider this a good performance, which CREI notes has benefited from it collecting rents directly (ie not through a third-party agent), allowing better engagement with regard to payments and facilitating an improved outcome.

Exhibit 3: FY21 rent collection performance

FY21 (£m)

Before agreed deferrals

After agreed deferrals

IFRS rental income

38.8

Lease incentive adjustment (non-cash)

(1.9)

Cash rental income expected, before agreed deferrals

36.9

100%

Agreed rent deferrals

(0.9)

-3.0%

Cash rental income expected, after agreed deferrals

36.0

100.0

Outstanding rental income

(3.1)

-8%

Rental income collected

32.9

89%

91%

Source: Custodian REIT. Note: Some rounding differences apply to percentages.

Around £3.1m of rent remained outstanding and due, and the subject of continuing discussions with tenants. As a result of the government’s moratorium on the eviction of tenants for non-payment of rent (previously extended but currently due to expire at the end of June 2021), we suspect that not all of this represents an inability to pay on the part of tenants. However, clearly a portion does and in some cases rent arrears are at risk of non-recovery from CVAs or insolvency.

For the current quarter (Q122), 66% of rent (before agreed deferrals) had been collected, in line with the same point in previous quarters and expected to increase.

Portfolio

The end-FY21 portfolio comprised 159 assets and was externally valued at £551.9m (FY20: £559.6m). The average lot size of c £3.5m reflects CREI’s strategy of targeting assets that may be too small for many institutional investors but too large for most private investors; with less competition from buyers, yields are typically higher. The valuation reflects a net initial yield of 6.6% (FY20: 6.7%) based on a contracted rent roll of c £38.9m. Active asset management has supported income and capital values through continuing lease events (new lets, renewals and re-gears), but tenant failures during the pandemic drove the decrease in occupancy from 95.9% to 91.5% during the year. Absent further significant failures, CREI expects occupancy levels to increase over the next three to six months as more new lettings are completed.

The portfolio is characterised by a very strong weighting to industrials, with a high exposure to retail warehouse and ‘other assets’1 compared with the overall market. Offices and high street retail exposures are relatively low. Valuations were hit hard by the pandemic, across all sectors, in Q121 but the subsequent continuing strength of industrial sector assets drove a net recovery in portfolio valuation through H221.

Other assets include car showrooms, petrol filling stations, children's day nurseries, restaurants, gyms, hotels, and healthcare units.

Exhibit 4: Portfolio weightings by value and income

Valuation (£m)

Weighting by value

Weighting by income

Industrial

270.2

49%

41%

Retail warehouse

99.7

18%

21%

Other

84.4

15%

16%

Office

54.8

10%

12%

High street retail

42.8

8%

10%

Portfolio total

551.9

100%

100%

Source: Custodian REIT

The strong performance of CREI’s industrial assets mirrors the market-wide trend but also benefited from asset management initiatives. The sector is benefiting from the accelerated trend of online purchasing during the pandemic as well as ‘onshoring’ of supply chains in response to Brexit. The ‘out-of-town’ retail warehouse sector performed significantly more strongly than high street retail and CREI notes recent strong competition for assets in the sector reflecting its convenience, relatively low rental cost, availability of parking and complementarity to online retail. The ‘other’ sector contains a number of tenant exposures that would ordinarily be defensive in terms of the economic cycle but which in the past year have proved less resilient to the pandemic, particularly during the first lockdown; capital values have increased in each of the past two quarters.

Exhibit 5: Quarterly like-for-like valuation movement

Jun-21

Sep-21

Dec-21

Mar-21

Mar-21

£m

Q121

Q221

Q321

Q421

FY21

Industrial

(5.5)

1.0

9.6

6.9

12.0

Retail warehouse

(5.9)

(1.4)

(2.5)

(1.2)

(11.0)

Other

(6.3)

(0.8)

0.7

0.9

(5.5)

High St retail

(4.3)

(1.0)

(2.1)

(1.1)

(8.5)

Office

(2.2)

(0.9)

(1.6)

(1.9)

(6.6)

Portfolio total (£m)

(24.2)

(3.1)

4.1

3.6

(19.6)

Industrial

-2.2%

0.4%

3.8%

2.6%

Retail warehouse

-5.1%

-1.3%

-2.4%

-1.2%

Other

-6.8%

-1.0%

0.8%

1.0%

High St retail

-7.5%

-2.1%

-4.5%

-1.9%

Office

-4.1%

-1.8%

-3.3%

-4.3%

Portfolio total (%)

-4.2%

-0.6%

0.8%

0.7%

Source: Custodian REIT

Forecasts update

We have updated our forecasts, bringing FY21 into line with the unaudited Q421 data. Compared with our last published forecast (August 2020), FY21 EPRA NAV was higher and EPRA EPS slightly lower. DPS was also ahead, although our forecast predated the increase in the quarterly run rate of DPS declared in respect of Q321. FY21 annualised contracted rental income was more robust than we had allowed (but was nonetheless lower), resulting in higher than forecast accounting net rental income. Although rent collection continued to strengthen, charges against receivables were higher, and perhaps more prudent, than we allowed for and were the main reason why EPRA earnings and EPS were slightly below our forecast. The H221 recovery in all portfolio valuations drove the higher than forecast EPRA NAV.

We have made relatively modest revisions to our FY22 forecast and have introduced a tentative FY23 forecast.

Exhibit 6: Forecast revisions

Net rental income (£m)

EPRA EPS (p)

DPS (p)

EPRA NAV/share (p)

Net LTV

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (pp)

03/21e

35.5

36.9

3.8

5.8

5.6

-2.5

4.20

5.00

19.0

94.5

97.6

3.3

23.0%

24.9%

8.1

03/22e

35.4

36.2

2.1

6.1

6.1

0.0

5.60

5.60

0.0

95.2

98.4

3.3

22.9%

24.4%

6.8

03/23e

N/A

37.2

N/A

N/A

6.5

N/A

N/A

6.00

N/A

N/A

100.2

N/A

N/A

23.9%

N/A

Source: Edison Investment Research

The key forecasting uncertainties relate to rental income and collection, and our assumptions include:

Slightly lower net rental income in FY22 due to the lower start-year annualised contracted rental income compared with FY21, partly offset by an improvement in occupancy. We expect the strong portfolio weighting to support estimated rental value (ERV) in FY22, offsetting further weakness in retail sectors (albeit at a slowing rate). For FY23, we anticipate a modest average c 0.8% increase in ERV across a broader base of the portfolio.

Further charges against rent receivable in FY21 but at a much reduced rate (£0.6m versus an estimated £3.3m in FY21), despite the likelihood of a further improvement in collection rates as the lockdown eases further, and primarily reflecting the potential impact of current CVAs and administrations. This may prove to be conservative, given the current level of provisioning and the potential to collect outstanding rents from financially viable tenants that have chosen to delay payment during the government moratorium on eviction.

Our NAV forecasts benefit from relatively low but positive capital return assumptions which, on a sector-by-sector basis, are broadly in line with the most recent consensus forecasts published by the Investment Property Forum (IPF). For FY22, we expect a blended increase of c 1%, again driven by industrial assets, and for FY23 we expect a blended c 1.5% as the recovery in capital values broadens across sectors. As always, there is much uncertainty about this. Each 1% increase/decrease in the value of the investment portfolio compared with our forecast would increase/decrease NAV per share by c 1.3%.

Performance and valuation

Although the UK commercial property market returns have historically shown significant cyclicality, income returns have been much less volatile than capital values. In this context, CREI’s consistent strategy since IPO has been targeted at generating sustainable and growing income returns, with the potential for additional capital growth over time. Although the exceptional circumstances of the pandemic forced a reduction in DPS in FY21, quarterly dividends were uninterrupted (unlike certain peers where DPS was suspended for a period) and have been maximised while tracking cash rental receipts. Attractive income returns on NAV have been maintained, and despite volatility in capital values, total return on NAV has also remained positive, albeit at a reduced level. From listing in March 2014 to March 2021 (FY21), CREI generated an EPRA NAV total return of 41.1%, or a compound annual average return of 5.9% pa, all of which has been generated by dividend payments.

Exhibit 6: EPRA NAV total return history

Year ending 31 March

2015

2016

2017

2018

2019

2020

2021

Cumulative since IPO

Opening EPRA NAV per share (p)

98.2

101.3

101.5

103.8

107.3

107.1

101.6

98.2

Closing EPRA NAV per share (p)

101.3

101.5

103.8

107.3

107.1

101.6

97.6

97.6

Dividends paid per share (p)

3.750

6.350

6.350

6.425

6.525

6.625

4.913

40.9

EPRA NAV total return

7.0%

6.4%

8.5%

9.6%

5.9%

1.0%

0.9%

41.1%

o/w income returns

3.8%

6.3%

6.3%

6.2%

6.1%

6.2%

4.8%

101%

Compound annual total return

5.9%

Source: Custodian REIT data, Edison Investment Research

The company’s minimum target for aggregate FY22 DPS of 5.0p, represents a prospective yield of 5.1%, and our forecast 5.6p DPS represents a yield of 5.7%. The shares are trading at around NAV, below the average c 8% premium since IPO in March 2014, and have recently traded at a premium. This allowed CREI to respond to investor demand for the shares by recommencing modest share issuance, at a premium to NAV, under its tap facility. The ability to issue equity at a premium to NAV has historically been of benefit to CREI, allowing it to maintain accretive portfolio growth while maintaining a low level of gearing, and without share issuance dilution.

In Exhibit 8, we show a summary performance and valuation comparison of Custodian and what we consider to be its closest diversified income-oriented peers. For comparative purposes, the valuation data are shown on a trailing basis and so do not capture the prospective increase in CREI’s DPS from 4.5p to 5.0p in respect of FY22. CREI trades on a higher P/NAV than the average of the group, as it has done for most of the period since IPO in 2014, while its trailing yield is slightly below average. Factors supporting CREI’s valuation include uninterrupted quarterly DPS during the pandemic (albeit at a reduced level), moderate gearing and a focus on smaller lot size properties with a yield premium that has historically supported risk-adjusted income returns.

Exhibit 7: Peer comparison

Price
(p)

Market
cap (£m)

P/NAV*
(x)

Trailing
yield** (%)

Share price performance

One month

Three months

12 months

From 12-month high

Ediston Property

67

142

0.78

6.3

-4%

-3%

68%

-7%

BMO Real Estate Investments

75

181

0.76

4.2

-6%

1%

52%

-8%

BMO Commercial Property Trust

82

652

0.68

3.5

2%

13%

57%

-5%

Picton

85

463

0.89

3.4

-7%

-1%

51%

-8%

Regional REIT

83

358

0.81

7.7

-1%

9%

14%

-6%

Schroder REIT

46

238

0.78

3.5

13%

16%

53%

-2%

Standard Life Investment Property

67

271

0.78

5.1

2%

9%

17%

-10%

UK Commercial Property REIT

74

963

0.84

3.4

-3%

12%

46%

-11%

Average

0.78

4.8

0%

7%

45%

-7%

Custodian

98

410

1.00

4.6

1%

7%

24%

-6%

UK property sector index

1,711

1%

9%

32%

-4%

UK equity market index

3,966

0%

6%

26%

-3%

Source: Company data, Refinitiv price data as at 14 May 2021. Note: *Based on last reported NAV. **Based on trailing 12-month dividends declared.

Exhibit 8: Financial summary

Year end 31 March

£m

2015

2016

2017

2018

2019

2020

2021e

2022e

2023e

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Gross rental income

11.2

18.6

27.0

34.1

39.1

40.0

38.7

38.0

39.1

Re-charge income

0.3

0.5

0.6

0.8

0.9

0.9

0.9

0.9

0.9

Total revenue

 

 

11.6

19.0

27.6

34.8

40.0

40.9

39.7

38.9

40.0

Gross property expenses

(0.7)

(1.0)

(1.9)

(1.6)

(2.4)

(2.8)

(2.8)

(2.7)

(2.8)

Net rental income

 

 

10.9

18.0

25.7

33.2

37.6

38.1

36.9

36.2

37.2

Administrative expenses

(2.3)

(2.8)

(3.6)

(4.4)

(4.9)

(4.8)

(8.2)

(5.4)

(4.9)

Operating Profit before revaluations

 

 

8.5

15.2

22.1

28.8

32.7

33.4

28.7

30.7

32.3

Revaluation of investment properties

6.1

3.0

9.0

11.9

(5.5)

(25.9)

(19.7)

2.8

4.8

Costs of acquisitions

(5.8)

(5.8)

(6.1)

(6.2)

(3.4)

(0.6)

(0.7)

0.0

0.0

Profit/(loss) on disposal

0.3

0.1

1.6

1.6

4.3

(0.1)

0.5

0.0

0.0

Operating Profit

9.0

12.5

26.6

36.1

28.0

6.8

8.8

33.5

37.1

Net Interest

(0.3)

(1.3)

(2.4)

(3.7)

(4.4)

(4.7)

(5.0)

(5.0)

(5.0)

Profit Before Tax

 

 

8.7

11.2

24.2

32.4

23.6

2.1

3.8

28.5

32.1

Taxation

(0.0)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit After Tax

8.7

11.2

24.2

32.4

23.6

2.1

3.8

28.5

32.1

Net revaluation of investment property/costs of acquisition

(0.2)

2.7

(2.9)

(5.6)

8.9

26.4

20.4

(2.8)

(4.8)

Gains/(losses) on disposal

(0.3)

(0.1)

(1.6)

(1.6)

(4.3)

0.1

(0.5)

0.0

0.0

EPRA earnings

8.2

13.9

19.7

25.2

28.5

28.7

23.7

25.7

27.3

Average Number of Shares Outstanding (m)

146.1

204.2

298.7

362.4

391.9

409.7

420.1

420.5

420.6

IFRS EPS (p)

 

 

5.99

5.49

8.10

8.95

6.03

0.52

0.91

6.77

7.63

EPRA EPS (p)

 

 

5.64

6.80

6.59

6.94

7.26

7.00

5.64

6.12

6.49

Dividend per share (p)

 

 

5.25

6.25

6.35

6.45

6.55

6.65

5.00

5.60

6.00

Dividend cover (x)*

1.00

1.01

1.01

1.06

1.10

1.04

1.13

1.09

1.08

Ongoing charges ratio (excluding property expenses)

1.41%

1.33%

1.20%

1.15%

1.12%

1.12%

1.14%

1.17%

1.18%

BALANCE SHEET

Fixed Assets

 

 

207.3

319.0

418.5

528.9

572.7

559.8

551.9

557.7

565.5

Investment properties

207.3

319.0

418.5

528.9

572.7

559.8

551.9

557.7

565.5

Other non-current assets

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

1.9

10.0

10.3

12.9

6.1

30.7

23.0

20.9

20.2

Debtors

1.1

4.5

4.5

7.9

3.7

5.3

9.5

6.3

4.3

Cash

0.8

5.5

5.8

5.1

2.5

25.4

13.6

14.7

15.9

Current Liabilities

 

 

(5.4)

(8.2)

(12.6)

(12.8)

(14.2)

(14.9)

(15.8)

(15.2)

(14.6)

Creditors/Deferred income

(5.4)

(8.2)

(12.6)

(12.8)

(14.2)

(14.9)

(15.8)

(15.2)

(14.6)

Short term borrowings

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(23.8)

(65.7)

(64.4)

(113.9)

(138.1)

(148.9)

(149.2)

(149.5)

(149.8)

Long term borrowings

(23.8)

(65.1)

(63.8)

(113.4)

(137.5)

(148.3)

(148.6)

(148.9)

(149.2)

Other long term liabilities

0.0

(0.6)

(0.6)

(0.6)

(0.6)

(0.6)

(0.6)

(0.6)

(0.6)

Net Assets

 

 

180.0

255.1

351.9

415.2

426.6

426.8

409.9

414.0

421.2

NAV/share (p)

101.3

101.5

103.8

107.3

107.1

101.6

97.6

98.4

100.2

EPRA NAV/share (p)

101.3

101.5

103.8

107.3

107.1

101.6

97.6

98.4

100.2

CASH FLOW

Operating Cash Flow

 

 

12.8

13.9

23.1

28.4

36.0

31.0

24.0

33.3

33.8

Net Interest

(0.2)

(1.3)

(2.2)

(3.5)

(4.2)

(4.4)

(4.7)

(4.8)

(4.7)

Tax

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net additions to investment property

(129.8)

(113.6)

(92.1)

(105.9)

(46.2)

(12.2)

(10.5)

(3.0)

(3.0)

Ordinary dividends paid

(5.5)

(12.2)

(18.5)

(23.0)

(25.5)

(27.0)

(20.6)

(25.0)

(24.8)

Debt drawn/(repaid)

23.8

41.7

(1.0)

49.4

24.0

10.5

0.0

0.0

0.0

Proceeds from shares issued (net of costs)

99.8

76.1

91.1

53.9

13.3

25.0

0.0

0.6

0.0

Other cash flow from financing activities

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

0.8

4.6

0.4

(0.7)

(2.6)

22.9

(11.8)

1.1

1.3

Opening cash

0.0

0.8

5.5

5.8

5.1

2.5

25.4

13.6

14.7

Closing cash

 

 

0.8

5.5

5.8

5.1

2.5

25.4

13.6

14.7

15.9

Debt as per balance sheet

(23.8)

(65.1)

(63.8)

(113.4)

(137.5)

(148.3)

(148.6)

(148.9)

(149.2)

Unamortised loan arrangement fees

(0.5)

(0.9)

(1.2)

(1.6)

(1.5)

(1.7)

(1.4)

(1.1)

(0.8)

Total debt

(24.3)

(66.0)

(65.0)

(115.0)

(139.0)

(150.0)

(150.0)

(150.0)

(150.0)

Restricted cash

(0.2)

(0.5)

(1.3)

(1.3)

(1.4)

(0.9)

(0.9)

(0.9)

(0.9)

Closing net debt

 

 

(23.7)

(61.0)

(60.5)

(111.3)

(137.9)

(125.5)

(137.3)

(136.2)

(135.0)

Net LTV

11.4%

19.1%

14.4%

21.0%

24.1%

22.4%

24.9%

24.4%

23.9%

Source: Custodian REIT historical data, Edison Investment Research forecasts

General disclaimer and copyright

This report has been commissioned by Custodian REIT and prepared and issued by Edison, in consideration of a fee payable by Custodian REIT. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Custodian REIT and prepared and issued by Edison, in consideration of a fee payable by Custodian REIT. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Custodian Property Income REIT

View All

Latest from the Real Estate sector

View All Real Estate content

Research: Metals & Mining

Alphamin Resources — Results confirm long-term potential

Alphamin’s Q121 financial results were released in the context of known operating results (which were announced on 9 April). These inevitably reflected the pattern whereby sales from Q4 were delayed into Q1 on account of seasonal rains and, as a result, revenue, costs and depreciation were all higher than our (pro rata) FY21 expectations. The immediate consequence of the results is that we have increased our earnings estimates for FY21 by 20.1% (see Exhibit 2). However, the much more substantive point is that they were absolutely consistent with our longer-term expectations for Alphamin that, at a long-term tin price of US$23,425/t, it is capable of generating revenues of c US$280m pa (average FY22–27), EBITDA of US$149m and EPS of 6.48 US cents/share.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free