DJ Custodian REIT plc: Interim Results
Custodian REIT plc (CREI) Custodian REIT plc: Interim Results 30-Nov-2021 / 07:00 GMT/BST Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
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6
30 November 2021
Custodian REIT plc
("Custodian REIT" or "the Company")
Interim Results
Custodian REIT (LSE: CREI), the UK commercial real estate investment company focused on smaller lot-sizes, today reports its interim results for the six months ended 30 September 2021 ("the Period").
Property highlights
-- Property portfolio value of GBP565.3m (31 March 2021: GBP551.9m, 2020[1]: GBP532.3m)
-- GBP32.3m aggregate valuation increase comprising a GBP2.3m property valuation uplift from asset managementinitiatives and GBP30.0m of general valuation increases, primarily due to hardening yields in the industrial andlogistics sector
-- GBP12.5m[2] invested in three property acquisitions
-- GBP4.2m profit on disposal[3] from the disposal of 10 properties for aggregate consideration of GBP38.5mcomprising:? A portfolio of seven industrial assets for GBP32.6m, GBP5.1m (19%) above the properties' 31 March 2021valuation, when terms of the sale were agreed, and GBP2.9m (10%) above the 30 June 2021 valuation, representing anet initial yield ("NIY") on sale price of 5.9%; - A retail warehouse in Galashiels to a special purchaser for GBP4.5m, GBP1.8m (67%) ahead of the 30 June2021 valuation, representing a NIY on sale price of 5.73%; and - Two smaller assets in the retail and other sectors GBP0.1m above valuation for aggregate considerationof GBP1.4m
-- Since the Period end:? An aggregate GBP46.5m invested in a portfolio of 10 office, retail and industrial assets through thecorporate acquisition of DRUM Income Plus REIT plc ("DRUM REIT"), and separately, an industrial unit in York;and - Three properties sold for consideration of GBP14.1m
Financial highlights and performance summary
-- 95% of rent collected relating to the six-month period, adjusted for contractual rent deferrals (year to31 March 2021: 91%, 2020: 88%)
-- EPRA[4] earnings per share[5] for the six-month period increased to 3.0p (2020: 2.6p) due to the movementin the doubtful debt provision during the six-month period changing from a GBP2.9m increase in 2020 to a GBP0.1mdecrease during the Period
-- Basic and diluted earnings per share[6] increased to 11.4p (2020: -3.8p) primarily due to propertyportfolio valuation increases of GBP32.3m (2020: GBP27.4m decrease)
-- Profit before tax of GBP48.1m (2020: loss of GBP16.1m)
-- Aggregate dividends per share of 2.5p declared for the Period (2020: 2.0p)
-- Target quarterly dividend per share increased by 10% to 1.375p commencing from the quarter ending 31December 2021, resulting in target dividends per share of no less than 5.25p for the year ending 31 March 2022 and5.5p for the year ending 31 March 2023, based on rent collection levels remaining in line with expectations
-- NAV per share 106.0p (31 March 2021: 97.6p, 2020: 95.2p)
-- NAV per share total return[7] of 11.7% (2020: -3.7%) comprising 3.1% income (2020: 2.6%) and a 8.6%capital change (2020: -6.3% capital change)
-- GBP0.6m of new equity[8] raised at a premium of 5.9% to dividend adjusted NAV
Unaudited Unaudited Audited
6 months to 6 months to 12 months to 31 Mar 2021
30 Sept 2021 30 Sept 2020
Total return
Share price total return[9] 4.7% (7.7%) 2.3%
Capital values
NAV and EPRA NTA[10] (GBPm) 445.9 399.7 409.9
NAV per share and EPRA NTA per share (p) 106.0 95.2 97.6
Share price (p) 93.1 88.8 91.8
Net gearing[11] 19.6% 23.4% 24.9%
EPRA vacancy rate[12] 8.4% 7.1% 8.4%
Weighted average energy performance certificate ("EPC") rating[13] C (62) C (66) C (63)
The Company presents alternative performance measures ("APMs") to assist stakeholders in assessing performance alongside the Company's results on a statutory basis.
APMs are among the key performance indicators used by the Board to assess the Company's performance and are used by research analysts covering the Company. Certain other APMs may not be directly comparable with other companies' adjusted measures, and APMs are not intended to be a substitute for, or superior to, any IFRS measures of performance. Supporting calculations for APMs and reconciliations between APMs and their IFRS equivalents are set out in Note 18.
David Hunter, Chairman of Custodian REIT, said:
"The UK property market has shown significant resilience since the outbreak of the COVID-19 pandemic. The subsequent recovery, in certain sectors, since the successful vaccination roll-out has been marked with the Company's rent collections improving to 95%, net of contractual deferrals, and EPRA earnings per share increasing to 3.0p (2020: 2.6p) reflecting this improvement and the stabilisation of the Company's rent roll.
"As a result of this recovery I was very pleased to be able to declare dividends per share of 2.5p (2020: 2.0p) for the Period and, from the quarter ending 31 December 2021, the Board intends to increase quarterly dividends per share to 1.375p to achieve an annualised target dividend per share of no less than 5.5p, based on rent collection levels remaining at least in line with expectations.
"The COVID-19 pandemic has reinforced Custodian REIT's strategy which, over and above decisions in relation to investment approach, has always placed income and financial resilience at the heart of the Company's objectives. When allied to the appropriate property strategy this focus underpins sustainable dividends, which in turn support long-term total return."
Further information
Further information regarding the Company can be found at the Company's website www.custodianreit.com or please contact:
Custodian Capital Limited
Richard Shepherd-Cross / Ed Moore / Ian Mattioli MBE Tel: +44 (0)116 240 8740
www.custodiancapital.com
Numis Securities Limited
Hugh Jonathan/Nathan Brown Tel: +44 (0)20 7260 1000
www.numiscorp.com
Camarco
Ed Gascoigne-Pees Tel: +44 (0)20 3757 4984
www.camarco.co.uk Custodian REIT plc interim results for the six months ended 30 September 2021
Chairman's statement
The UK property market has shown significant resilience since the outbreak of the COVID-19 pandemic. The subsequent recovery, in certain sectors, since the successful vaccination roll-out has been marked with the Company enjoying a GBP32.3m valuation increase during the six months ended 30 September 2021. EPRA earnings per share increased to 3.0p (2020: 2.6p) reflecting the stabilisation of the Company's rent roll and the Company's rent collections improving to 95%, net of contractual deferrals, which provided 120% cover for dividends relating to the Period.
The recent volatility in markets has emphasised the importance of having a well-diversified, income focused property portfolio. I was very pleased to be able to announce that despite the inevitable disruption to cash collection caused by the COVID-19 pandemic, dividends per share of 2.5p (2020: 2.0p) have been declared relating to the Period. From the quarter ending 31 December 2021 the Board intends to increase quarterly dividends per share to 1.375p to achieve a target dividend per share for the year ending 31 March 2022 of no less than 5.25p and for the year ending 31 March 2023 of no less than 5.5p, based on rent collection levels remaining at least in line with expectations.
While it is clear that a renewed spread of the pandemic, possibly through further variants, will lead to a reintroduction of some restrictions, the UK Government has made it clear that they are committed to avoiding a return to lockdown, if at all possible. We will approach any such event in the same manner as previous restrictions, optimising rent collection through close liaison with our tenants. The Company's strategy of direct rent collection ensures a close understanding of tenant needs and an ability to react appropriately to these, to mutual benefit.
The Board acknowledges the importance of income for shareholders and its objective is to grow the dividend on a sustainable basis at a rate which is fully covered by projected net rental income and does not inhibit the flexibility of the Company's investment strategy.
These have been testing times which have necessitated an exceptional effort from the Investment Manager, both in the collection of rents and in operating remotely as a team. I would like to acknowledge the results of their efforts. I also thank my fellow Board members who have been flexible and supportive during a period which has required numerous formal and informal additional Board meetings. Net asset value
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The NAV of the Company at 30 September 2021 was GBP445.9m, approximately 106.0p per share, an increase of 8.4p (8.6%) since 31 March 2021:
Pence per share GBPm NAV at 31 March 2021 97.6 409.9 Issue of equity - 0.5 Valuation movements relating to: - Asset management activity 0.5 2.3 - Other valuation movements 7.2 30.0 Valuation increase before acquisition costs 7.7 32.3 Impact of acquisition costs (0.3) (1.1) Valuation increase including acquisition costs 7.4 31.2 Profit on disposal of investment property 1.0 4.2 Net valuation movement 8.4 35.4 Revenue 4.8 20.2 Expenses and net finance costs (1.8) (7.5) Dividends paid[14] during the Period (3.0) (12.6) NAV at 30 September 2021 106.0 445.9
Borrowings and cash
The Company operates the following debt facilities:
-- A GBP35m revolving credit facility ("RCF") with Lloyds Bank plc ("Lloyds") with interest of between 1.5%and 1.8% above three-month LIBOR, determined by reference to the prevailing LTV ratio, and expiring on 17 September2024. The RCF facility limit can be increased to GBP50m with Lloyds' consent;
-- A GBP20m term loan with Scottish Widows plc with interest fixed at 3.935% and repayable on 13 August 2025;
-- A GBP45m term loan with Scottish Widows plc with interest fixed at 2.987% and repayable on 5 June 2028; and
-- A GBP50m term loan with Aviva Real Estate Investors ("Aviva") comprising:a. GBP35m Tranche 1 repayable on 6 April 2032 attracting fixed annual interest of 3.02%; and b. GBP15m Tranche 2 repayable on 3 November 2032 attracting fixed annual interest of 3.26%.
Each facility has a discrete security pool, comprising a number of the Company's individual properties, over which the relevant lender has security and the following financial covenants:
-- The maximum LTV of each discrete security pool is between 45% and 50%, with an overarching covenant onthe Company's property portfolio of a maximum 35% LTV; and
-- Historical interest cover requiring net rental receipts from each discrete security pool over thepreceding three months to exceed 250% of the facility's quarterly interest liability.
The Aviva facility also contains a projected interest cover covenant requiring net contractual rents from the security pool over the next 12 months to exceed 250% of the facility's quarterly interest liability.
The Company complied with all loan covenants during the Period.
The Company is in the process of charging GBP30.3m of property to replace charged assets sold during the Period which, once complete, will mean GBP153.4m (27% of the property portfolio at 30 September 2021) of unencumbered assets will be available to be charged to the security pools to enhance the LTV on individual loans if required.
Through the corporate acquisition of DRUM REIT since the Period end, the Custodian REIT group now also operates a GBP25m RCF facility with the Royal Bank of Scotland expiring on 30 September 2022 with interest of 1.75% above three-month LIBOR. The facility's key financial covenants comprise a maximum LTV of DRUM REIT's property portfolio of 50% and minimum historical interest cover of 250%.
The weighted average cost of the Company's agreed debt facilities is 2.9% (2020: 2.9%) with a weighted average maturity of 6.9 years (2020: 7.3 years). 78% (2020: 77%) of the Company's agreed debt facilities are at a fixed rate of interest, significantly mitigating interest rate risk.
Dividends
During the Period the Company paid fourth and fifth interim dividends per share for the financial year ended 31 March 2021 of 1.25p and 0.5p respectively, and the first quarterly dividend per share for the financial year ending 31 March 2022 of 1.25p, relating to the quarter ended 30 June 2021.
In line with the Company's dividend policy the Board approved an interim dividend of 1.25p per share for the quarter ended 30 September 2021 which will be paid on 30 November 2021 to shareholders on the register on 12 November 2021.
Business model and strategy
Custodian REIT offers investors the opportunity to access a diversified portfolio of UK commercial real estate through a closed-ended fund. The Company seeks to provide investors with an attractive level of income and the potential for capital growth, becoming the REIT of choice for private and institutional investors seeking high and stable dividends from well-diversified UK real estate.
The Company's investment policy[15] is summarised below:
-- To invest in a diverse portfolio of UK commercial real estate, principally characterised by individualproperty values of less than GBP10m at acquisition.
-- The property portfolio should be diversified by sector, location, tenant and lease term, with a maximumweighting to any one property sector or geographic region of 50%.
-- To focus on areas with high residual values, strong local economies where demand for property exceedssupply, acquiring modern buildings or those considered fit for purpose by occupiers.
-- No one tenant or property should account for more than 10% of the rent roll at the time of purchase,except for:
(i) governmental bodies or departments; or
(ii) single tenants rated by Dun & Bradstreet as having a credit risk score higher than two[16], where exposure may not exceed 5% of the rent roll.
-- The Company will not undertake speculative development except for the refurbishment of existing holdings,but may invest in forward funding agreements where the Company may acquire pre-let development land and constructinvestment property with the intention of owning the completed development.
-- The Company may use gearing provided that the maximum LTV shall not exceed 35%, with a medium-term netgearing target of 25% LTV. Investment Manager
Custodian Capital Limited ("the Investment Manager") is appointed under an investment management agreement ("IMA") to provide asset management, investment management and administrative services to the Company.
Board succession
We were delighted to welcome Elizabeth McMeikan and Chris Ireland to the Board on 1 April 2021 who bring a range of different but complementary skills, strengthen the Board's property and governance experience and add to its diversity.
Two of the Company's five independent Directors were appointed in 2014. The Company's succession policy allows for a tenure of longer than nine years, in line with the 2019 AIC Corporate Governance Code for Investment Companies ("AIC Code"), but the Board acknowledges the benefits of ongoing Board refreshment. For this reason expected Director retirement dates are staggered within a nine year tenure period. Where possible, the Board's policy is to recruit successors well ahead of the retirement of Directors and a recruitment process is underway to appoint an Audit and Risk Committee Chair designate.
The Board is conscious of the increased focus on diversity and recognises the value and importance of diversity in the boardroom. No Directors are from a minority ethnic background. The appointment of Elizabeth McMeikan increased the female representation on the Board to 33% which meets the gender diversity recommendations of the Hampton-Alexander Review for at least 33% female representation on FTSE350 company boards. As a constituent of the FTSESmallCap Index Custodian REIT is not bound by this recommendation. The Board supports the overall recommendations of the Hampton-Alexander and Parker Reports although it is not seen to be in the interests of the Company and its shareholders to set prescriptive diversity targets for the Board at this point.
Environmental, social and governance ("ESG")
The Board recognises that its decisions have an impact on the environment, people and communities. It also believes there are positive financial reasons to incorporate good ESG practices into the way we do business.
The Board shares the increased stakeholder interest in, and recognises the importance of, compliance requirements around good ESG management. It seeks to adopt sustainable principles wherever possible, actively seeking opportunities to make environmentally beneficial improvements to its property portfolio and encouraging tenants to report and improve emissions data. The ESG Committee monitors the Company's performance against its environmental key performance indicators ("KPIs") to ensure it complies with its environmental reporting requirements and encourages positive social outcomes being achieved for its stakeholders and the communities in which it operates.
As a result, the Board has committed to:
-- Seek to minimise emissions, energy consumption and waste;
-- Comply with all relevant environmental legislation and real estate reporting best practice;
-- Gather and analyse data on our environmental performance across our property portfolio;
-- Monitor environmental performance and achievements against targets for our properties;
-- Invest in on-site renewables and carbon reducing technology as a commitment to continuous improvement;and
-- Let buildings which are comfortable, safe and high-quality spaces where the wellbeing of occupants andthe quality of their occupancy is maximised.
Outlook
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The absolute focus on rent collection, financial resilience and maintaining fully covered dividends has occupied the Board's attention throughout the Period. Indeed, the COVID-19 pandemic has reinforced Custodian REIT's strategy which, over and above decisions in relation to investment approach, has always placed income and financial resilience at the heart of the Company's objectives. When allied to the appropriate property strategy this focus underpins sustainable dividends, which in turn support long-term total return.
The Board is confident that the Company's portfolio is well placed to meet these objectives through income and valuation growth.
David Hunter
Chairman
29 November 2021
Investment Manager's report
Property market
The valuation movements by sector in the Custodian REIT property portfolio during the Period tell a story that is repeated across the market. Industrial and logistics assets continue to see strong demand from investors and occupiers. Occupier demand is driving rental growth, which is encouraging investors still further in their pricing. This virtuous circle appears to have some way to run, particularly amongst smaller regional properties, where inflationary pressures on construction costs, limited development and an ongoing excess of occupier demand over supply support continued rental growth.
Pricing in the retail warehouse sector is recovering strongly as occupiers have proved resilient through the pandemic with those in DIY, discounting, homewares and food all trading well. Where investors are confident that rental levels are sustainable, pricing has moved noticeably during the Period.
We were delighted to take advantage of the strength and depth of demand in the industrial/logistics sector and the increasing demand for retail warehousing by making some opportunistic sales during the Period. We completed the sale of a portfolio of seven industrial units which we felt did not meet our medium-term aspirations for rental growth or might require a level of capital expenditure that we would not recover in the valuation. As part of the sale we agreed a delayed completion which enabled us to part-invest the expected proceeds in advance of completion which helped reduce cash drag. We also sold, to a special purchaser, a B&Q retail warehouse in Galashiels 67% ahead of valuation. While this property would normally be considered a target property for Custodian REIT we did not feel holding the property would achieve the upside value delivered by the sale.
To capitalise on the marginal yield achievable when buying smaller lot-size regional property, during the Period we acquired a distribution unit in Dundee and an office building in central Manchester and, since the Period end, a distribution unit in York for a combined sum of GBP11.1m at an aggregate net initial yield of c.6%. In all cases we believe there is strong rental growth potential over the short term.
Rent collection
Custodian Capital invoices and collects rent directly, importantly allowing it, as Investment Manager, to hold direct conversations promptly with most tenants regarding the payment of rent. This direct contact has proved invaluable through the COVID-19 pandemic disruption, enabling better outcomes for the Company. Many of these conversations have led to positive asset management outcomes, some of which are discussed below.
95% of rent relating to the Period net of contractual rent deferrals has been collected, or 98% before contractual deferrals, as set out below:
Net of contractual rent Before contractual rent
deferrals deferrals
GBPm
Rental income from investment property (IFRS basis) 19.3
Lease incentives (0.7)
Cash rental income expected, before contractual rent 18.6 100%
deferrals
Contractual rent deferrals relating to the Period (0.1) (1%)
Contractual rent deferred from prior year falling due 0.7 4%
during the Period
Cash rental income expected, net of contractual rent 19.2 100% 103%
deferrals
Outstanding rental income (1.0) (5%) (5%)
Rental income collected 18.2 95% 98%
Outstanding rental income remains the subject of discussion with various tenants, although some arrears are potentially at risk of non-recovery from CVAs or Pre-pack Administrations.
Property portfolio performance
At 30 September 2021 the Company's property portfolio comprised 152 assets (31 March 2021: 159 assets), 197 tenants and 263 tenancies with an aggregate net initial yield ("NIY") of 6.2% (31 March 2021: 6.6%) and weighted average unexpired lease term to first break or expiry ("WAULT") was 5.0 years (31 March 2021: 5.0 years).
The property portfolio is split between the main commercial property sectors, in line with the Company's objective to maintain a suitably balanced portfolio, with a relatively low exposure to office and a relatively high exposure to industrial, retail warehouse and alternative sectors, often referred to as 'other' in property market analysis.
The current sector weightings are:
Valuation Weighting by Valuation Weighting
income[17] by income
30 Sept 31 March Valuation movement
2021 30 Sept 2021 31 March before acquisition costs
GBPm Weighting by Weighting by value
GBPm 2021 GBPm 2021 value 30 Sept 31 March 2021
2021
Sector
Industrial 275.9 40% 270.2 41% 28.3 49% 49%
Retail 105.3 21% 99.7 21% 8.1 19% 18%
warehouse
Other[18] 85.2 16% 84.4 16% 1.2 15% 15%
Office 61.8 13% 54.8 12% 0.4 11% 10%
High street 37.1 10% 42.8 10% (5.7) 6% 8%
retail
Total 565.3 100% 551.9 100% 32.3 100% 100%
Industrial and logistics property remains a very good fit with the Company's strategy. The demand for smaller lot-sized units is very broad, from manufacturing, urban logistics, online traders and owner occupiers. This demand, combined with a restricted supply resulting from limited new development, supports high residual values (where the vacant possession value is closer to the investment value than in other sectors) and drives rental growth. Despite a long period of growth in this sector, we still see opportunity.
The COVID-19 pandemic has deepened the challenges facing the high street retail sector causing further declines in retail values and the Company has continued to re-balance the portfolio away from secondary high street locations. By contrast we have witnessed a strong recovery in out-of-town retail/retail warehousing which remains an important asset class for the Company. We expect that well-located retail warehouse units, let off low rents, located on retail parks which are considered dominant in their area will continue to be in demand by retailers. The importance of convenience, free parking, the capacity to support click and collect and the relatively low cost compared to the high street should continue to support occupational demand for the Company's retail warehouse assets.
Regional offices will remain a sector of interest for the Company and we expect there to be activity post-pandemic in regional office markets. The rise in working remotely may not be restricted to working from home with a potential increase in working from regional satellite offices. Locations that offer an attractive environment to both live and work in and that offer buildings with high environmental standards and accessibility to a skilled workforce, will be most desirable. There is latent rental growth in many regional office markets where supply has been much diminished through redevelopment to alternative uses.
Custodian REIT targets properties across all asset classes that are capable of supporting the Company's ESG objectives and it is fully committed to investing in and refurbishing both new properties and the existing portfolio to meet these objectives.
The Company operates a geographically diversified property portfolio across the UK, seeking to ensure that no one region represents more than 50% of portfolio income. The geographic analysis of the Company's portfolio at 30 September 2021 was as follows:
Weighting Weighting
Period valuation by income by income
Valuation Weighting by value 30 Sep movement 11 11
2021 30 Sep 31 Mar
30 Sep GBPm Period valuation 2021 2021
2021 movement
Location
GBPm
West Midlands 119.1 21% 7.0 6% 20% 20%
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North-West 102.2 18% 1.4 2% 19% 17% South-East 80.9 14% 9.2 13% 14% 14% East Midlands 73.7 13% 2.6 4% 14% 14% South-West 59.6 11% 1.6 3% 10% 10% Scotland 49.0 9% 3.1 7% 8% 9% North-East 48.0 8% 3.7 9% 9% 10% Eastern 26.9 5% 3.3 14% 5% 5% Wales 5.9 1% 0.4 8% 1% 1% Total 565.3 100% 32.3 6% 100% 100%
For details of all properties in the portfolio please see custodianreit.com/property/portfolio.
Acquisitions
The Company invested GBP12.475m in three acquisitions during the Period described below:
-- A 20k sq ft office building on Fountain Street, Manchester for GBP6.25m. The property comprises basementparking and six floors let to Leyton UK, Meridian Healthcomms, Venditan and Fourthline with a weighted averageunexpired term to first break or expiry ("WAULT") of 1.2 years and an aggregate annual rent of GBP407k, reflecting aNIY of 6.1%;
-- A 49k sq ft industrial asset in Knowsley, Liverpool for GBP4.325m. The asset comprises six units occupiedby Engineering Solutions and Automations, Portakabin, Green Thumb, Central Electrical Armature and Med Imaging witha WAULT of 4.0 years and an aggregate annual passing rent of GBP260k, reflecting a net initial yield[19] ("NIY") of5.6%; and
-- A 30k sq ft industrial unit in Dundee for GBP1.9m occupied by Menzies Distribution with a WAULT of 5.2years and an annual passing rent of GBP118k, reflecting a NIY of 5.9%.
On 20 October 2021 the Company acquired a 29k sq ft industrial unit in York for GBP2.962m occupied by Menzies Distribution with a WAULT of 2.8 years and an annual passing rent of GBP186k, reflecting a NIY of 5.9%.
On 3 November 2021 the Company acquired 100% of the ordinary share capital of DRUM Income Plus REIT plc. Consideration for the acquisition of 20,247,040 new ordinary shares in the Company was calculated on an 'adjusted NAV-for-NAV basis', with each company's 30 June 2021 NAV being adjusted for respective acquisition costs with DRUM REIT's property portfolio valuation adjusted to the agreed purchase price of GBP43.5m. DRUM REIT's property portfolio at 30 September 2021 is summarised below:
-- 10 regional properties comprising five offices, three retail parks, one shopping centre and oneindustrial estate in aggregate covering approximately 330k sq ft
-- 78 tenants, the largest of which is Skills Development Scotland with annual rent of GBP0.5m (c.14% of DRUMREIT's rent roll)
-- EPRA occupancy rate of 86.1%, providing some short-term asset management opportunities
-- WAULT of 4.7 years
-- Contractual annual rent roll of GBP3.6m with an ERV of GBP4.4m
-- Portfolio valuation of GBP49.3m
-- Reversionary yield[20] ("RY") of 8.4%
-- All properties charged under a GBP25m RCF facility with The Royal Bank of Scotland
DRUM REIT represents an excellent fit with Custodian REIT's investment policy, targeting smaller regional property with a strong income focus. The purchase price reflected a sufficient discount to DRUM REIT's NAV to be accretive to existing Custodian REIT shareholders and to provide DRUM REIT shareholders with an increase in like for like share price, as well as delivering them a growing dividend from a much larger specialist in the smaller regional property sector with much improved liquidity.
Details of each property within DRUM REIT's portfolio are:
Location: Gosforth, Newcastle Location: Central Glasgow Sector: Retail (shopping centre) Sector: Office Tenants: Sainsbury's, multiple small local retailers Tenant: Skills Development Scotland RY: 8.1% RY: 6.8% Purchase price: GBP8.975m Purchase price: GBP7.087m Location: Cheadle, Greater Manchester Location: Edinburgh Business Park Sector: Office Sector: Office Tenants: Agilent Technologies, Micron Europe Tenant: Multiple RY: 9.3% RY: 10.0% Purchase price: GBP5.036m Purchase price: GBP4.593m Location: Central Manchester Location: Southport Sector: Office Sector: Retail warehouse Tenants: Multiple Tenant: Multiple RY: 12.4% RY: 9.0% Purchase price: GBP4.503m Purchase price: GBP3.963m Location: Dunfermline Location: Gloucester Sector: Retail warehouse Sector: Retail warehouse Tenants: Multiple Tenant: Farmfoods RY: 9.8% RY: 8.3% Purchase price: GBP3.687m Purchase price: GBP2.396m Location: Aberdeen airport Location: Gateshead Sector: Industrial Sector: Office Tenants: Multiple Tenants: Worldpay, Datawright RY: 11.8% RY: 17.0% Purchase price: GBP1.66m Purchase price: GBP1.6m
Disposals
Owning the right properties at the right time is a key element of effective property portfolio management, which necessarily involves periodically selling properties to balance the property portfolio. Custodian REIT is not a trading company but identifying opportunities to dispose of assets significantly ahead of valuation or that no longer fit within the Company's investment strategy is important.
The Company sold the following properties during the Period for an aggregate consideration of GBP38.5m:
-- A portfolio of seven industrial properties located in Gateshead, Stockton-on-Tees, Warrington, Stone,Christchurch, Aberdeen and Bedford for GBP32.6m, GBP5.1m (19%) above the 31 March 2021 valuations. The properties wereacquired either in the seed portfolio at IPO or within subsequent portfolio acquisitions and have an aggregatecurrent passing rent of GBP2.0m, reflecting a NIY on sale price of 5.9%;
-- A 31,062 sq ft retail warehouse in Galashiels for GBP4.5m to a special purchaser, GBP1.8m (67%) ahead of the30 June 2021 valuation;
-- A vacant children's day nursery in Basingstoke for GBP0.65m, GBP0.1m ahead of the last published valuation;and
-- A retail unit in Nottingham at auction for GBP0.7m, in line with the most recent valuation.
Since the Period end the Company sold:
-- A 42,289 sq ft car showroom in Stockport for GBP9.0m, GBP1.4m (18%) ahead of the 30 June 2021 valuation;
-- A 22,720 sq ft car showroom in Stafford for GBP4.9m, GBP1.15m (31%) ahead of the 30 June 2021 valuation; and
-- A high street retail units in Cheltenham at valuation for an aggregate GBP0.2m.
Property portfolio risk
The property portfolio's security of income is enhanced by 18% of income benefitting from either fixed or indexed rent reviews.
Short-term contractual income at risk is a relatively low proportion of the property portfolio's total income, with 32% expiring in the next three years and 14% within one year.
30 Sept 31 Mar
2021 2021
Aggregate income expiry
0-1 years 14% 11%
1-3 years 18% 20%
3-5 years 20% 22%
5-10 years 35% 34%
10+ years 13% 13%
100% 100%
The Company's Annual Report for the year ended 31 March 2021 set out the principal risks and uncertainties facing the Company at that time. We do not anticipate any changes to those risks and uncertainties over the remainder of the financial year, but highlight the following:
Unidentified liabilities
The purchase of DRUM REIT increases the likelihood of unidentified liabilities having been acquired, but this risk has been mitigated through comprehensive financial, tax, property and legal due diligence being undertaken in conjunction with the Company's professional advisers.
COVID-19 pandemic
The impact of the COVID-19 pandemic has been pervasive across the globe and we believe it will continue to impact rental receipts, tenant stability, property valuations and government legislation for at least the remainder of the financial year ending 31 March 2022.
We believe the Company is well placed to weather any further negative impacts of the COVID-19 pandemic because of its diverse portfolio by sector and location with an institutional grade tenant base and low net gearing.
Environmental
The Board is aware of the increasing focus from external stakeholders on the Company's environmental credentials and the increasing level of disclosure requirements regarding the Company's environmental impact. We continue to work with specialist environmental consultants to ensure compliance with new requirements and identify cost-effective opportunities to improve the Company's environmental performance.
Health and safety
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Although the Company's portfolio has no exposure to 'high risk' assets, typically high-rise properties (over 18m tall) or properties used for multiple residential occupation, it owns properties where cladding material has been used in construction. Whilst there is no legal requirement to remove composite cladding which is not Loss Prevention Certification Board ("LCPB") compliant (typically used in construction prior to 2005), to mitigate risk, the Investment Manager:
-- Ensures tenants provide up to date Fire Risk Assessments (FRA) undertaken by a reputable assessor;
-- Ascertains the composition of cladding, where practical, and ensures the tenant and local Fire Authorityare notified of any risks; and
-- Confirms tenants comply with FRA recommendations and remediations.
If core drilling identified non LCPB compliant cladding and the FRA recommended removal as potential mitigation measures might not be sufficient the Investment Manager would work with the tenants to ensure cladding was replaced.
Outlook
The resilience shown by real estate during the Pandemic and its strong recovery in the last six months, notwithstanding the threat from new COVID-19 variants, bears testament to continued occupier demand in industrial/ logistics and retail warehousing, in particular. In addition, the motor trade has also performed well and we are witnessing a recovery in occupier demand for offices.
Increasingly tenants require properties that meet their environmental and social objectives, never more so than in the office sector, where businesses will need to attract their staff back to the office and away from home. Custodian REIT is poised to meet the demands of its tenants and potential new occupiers, in this regard, investing in EV ("electric vehicle") charging on its retail parks and office sites and focusing refurbishment and re-development budgets on environmentally responsible fit out while working with tenants to improve the energy performance of existing buildings.
For so long as we can offer properties to our tenants that are fit for purpose and that lead on environmental performance improvements, we remain confident that the Company's diversified portfolio of smaller regional property will continue to deliver the long-term returns demanded by our shareholders.
Richard Shepherd-Cross
for and on behalf of Custodian Capital Limited
Investment Manager
29 November 2021 Asset management report
Our continued focus on asset management during the year including rent reviews, new lettings, lease extensions and the retention of tenants beyond their contractual break clauses and expiries resulted in a GBP2.3m valuation increase in the Period.
Property portfolio summary
30 Sept 2021 31 Mar 2021 Property portfolio value GBP565.3m GBP551.9m Separate tenancies 263 265 EPRA occupancy rate 91.6% 91.6% Assets 152 159 WAULT 5.0 years 5.0 years NIY 6.2% 6.6% Weighted average EPC rating C (62) C (63)
During the Period we have seen that continued close collaboration with tenants will generate asset management opportunities including lease extensions and re-gears which has seen the Company maintain its weighted average unexpired lease term to first break or expiry ("WAULT") at five years despite the effects of the COVID-19 pandemic.
Key asset management initiatives completed during the Period include:
-- A new five year lease with a third year break option to Green Retreats at a vacant industrial unit inFarnborough at an annual rent of GBP185k, increasing valuation by GBP0.9m;
-- A new five year lease without break to Galliford Try on a vacant office suite in Leicester with an annualrent of GBP165k, increasing valuation by GBP0.5m;
-- A 10 year lease renewal with a fifth year break option with BSS Group at an industrial unit in Bristol,increasing the annual passing rent from GBP250k to GBP255k with an open market rent review in year five, increasingvaluation by GBP0.3m;
-- A new 10 year lease of the vacant ground floor and a five year extension of the first floor with Dehns atthe Company's recently acquired offices in Oxford with an aggregate annual passing rent of GBP271k, increasingvaluation by GBP0.2m;
-- A new 10 year lease with a fifth year tenant break option with Livingstone Brown on a vacant office suitein Glasgow with an annual rent of GBP56k, increasing valuation by GBP0.2m;
-- A five year lease renewal with a third year break option with DHL at an industrial unit in Aberdeen,maintaining passing rent at GBP208k and increasing valuation by GBP0.1m;
-- A 10 year lease renewal with a fifth year break option with MP Bio Science at an industrial unit inHilton, increasing passing rent from GBP28k to GBP36k, resulting in an aggregate valuation uplift of GBP0.1m;
-- A new 10 year lease to SpaMedica at a vacant office building in Leicester with annual rent of GBP87k andopen market rent review in year five, with no impact on valuation;
-- A new lease with Just for Pets on a vacant retail warehouse unit in Evesham for a term of 10 years with abreak in year six, at an annual rent of GBP95k, with no impact on valuation;
-- A five year lease renewal with Quantem Consulting at an office building in Birmingham, increasing theannual passing rent from GBP30k to GBP39k, with no impact on valuation;
-- A 10 year lease extension with a break option in year five with Subway at a retail unit in Birmingham,maintaining the annual passing rent of GBP14k, with no impact on valuation;
-- A new five year lease without break to Realty Law on a vacant office suite in Birmingham with an annualrent of GBP28k, with no impact on valuation; and
-- A five year lease renewal with a third year break option to Done Brothers (t/a Betfred) at a retail unitin Cheltenham with an annual rent GBP25k, with no impact on valuation.
Since the Period end the following initiatives have been completed:
-- A new 15 year lease to Loungers at Pride Hill, Shrewsbury at an annual rental of GBP90k;
-- A new 10 year lease to Ramsdens Financial at a retail unit on Argyle St, Glasgow at an annual rent ofGBP55k, increasing to GBP60k in year five;
-- A new five year lease of a retail unit at Pride Hill, Shrewsbury to Clogau Shrewsbury Limited at anannual rental of GBP55k;
-- A 15 year reversionary lease to Smyths Toys at a retail warehouse unit at Eastern Avenue, Gloucester atan annual rental of GBP130k;
-- A new five year lease to Midon Limited at an industrial unit in Penrhyn Court, Knowsley at an annualrental of GBP37k.
These positive asset management outcomes have been partially offset by the impact of the Administrations of JTF Wholesale (GBP586k of annual rent) and Rapid Vehicle Repair (GBP71k of annual rent) which have resulted in an aggregate 1.8% decrease in the annual rent roll.
While the short-term impact of an Administration is a hit to cash flow and valuation, the opportunity created by taking back control of the JTF site in Warrington in a prime distribution location, with the prospect of redeveloping the site to create a BREEAM 'Excellent' rated, high bay distribution unit should lead to a substantial net valuation uplift and also help meet the ESG objectives of Custodian REIT.
Tenant business failures have resulted in occupancy levels being maintained at 91.6% since 31 March 2021, but letting activity is increasing across most sectors.
Outlook
Looking forward, we maintain a positive outlook with many of the asset management initiatives currently under way expected to come to fruition over the next 6-12 months which should see new tenants secured, leases extended and new investment into existing assets improving their environmental credentials and realising their full potential.
Alex Nix
Assistant Investment Manager
for and on behalf of Custodian Capital Limited
Investment Manager
29 November 2021
ESG Committee Report
The Company is committed to delivering its strategic objectives in an ethical and responsible manner and meeting its corporate responsibilities towards society, human rights and the environment. The Board acknowledges its responsibility to society is broader than simply generating financial returns for shareholders. The Company's approach to ESG addresses the importance of these issues in the day-to-day running of the business, as detailed below.
ESG policy
Environmental - we want our properties to minimise their impact on the local and wider environment. The Investment Manager carefully considers the environmental performance of our properties, both before we acquire them, as well as during our period of management. Sites are visited on a regular basis by the Investment Manager and any obvious environmental issues are reported.
Social - Custodian REIT strives to manage and develop buildings which are comfortable, safe and high-quality spaces. As such, our aim is that the safety and well-being of occupants of our buildings is maximised. We have implemented a portfolio approach to well-being which encourages engagement with tenants, ensures maximum building safety and optimises comfort and quality of occupancy.
Governance - high standards of corporate governance and disclosure are essential to ensuring the effective operation of the Company and instilling confidence amongst our stakeholders. We aim to continually improve our levels of governance and disclosure to achieve industry best practice.
The Committee encourages the Investment Manager to act responsibly in the areas it can influence as a landlord, for example by working with tenants to improve the environmental performance of the Company's properties and minimise their impact on climate change. The Committee believes that following this strategy will ultimately be to the benefit of shareholders through enhanced rent and asset values.
The Company's environmental policy commits the Company to:
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-- Seek to reduce pollution and comply with all relevant environmental legislation;
-- Gather and analyse data on the environmental performance of our properties; and
-- Set targets for the environmental performance of our properties and monitor achievements as a commitmentto continuous improvement.
Environmental key performance indicators
Target environmental key performance indicators ("KPIs") provide a strategic way to measure the Company's success towards achieving its environmental objectives and ensure the Investment Manager is embedding key ESG principles in order to directly support climate risk mitigation and capture some ESG opportunities from the transition to a low-carbon economy.
The Company's qualitative and quantitative environmental targets, measured via the KPIs, cover four 'boundaries' and are set out below:
Area KPI Progress during the Period
Reduce total portfolio absolute Tenant data collection via a data platform currently covers c.
emissions against a 2019 baseline by 35% of the Company's portfolio by floor area which is expected to
Emissions and 30% by 2025 increase with improved tenant engagement. Analysis of this data
energy will allow us to analyse the portfolio and identify assets which
Reduce absolute energy consumption of are performing poorly in order to make improvements
the property portfolio by 15% against a
2019 baseline by 2025
All 'D' EPC ratings to be removed or
improved by 2027, all 'E' EPC ratings
to be removed or improved by 2025 and Weighted average EPC rating has moved from C(63) to C(62) during
EPCs all 'F' and 'G' EPC ratings to be the Period, detailed further below, and all F and G ratings have
removed or improved by 31 March 2022 been removed or improved
Switch all landlord-controlled sites to Currently at 95% and expect to achieve further improvements by
100% renewables by 2025 the end of the financial year
Green
procurement
11 properties have moved over to renewable energy contracts
Switch all landlord-controlled sites to during the Period
green gas by 2025
We have EV charging points on seven of our eleven retail park
assets which have landlord-controlled areas. We are working with
Install EV charging points across 100% PodPoint to target 100% coverage across the retail park portfolio
of the Company's retail warehouse and exploring roll out of EV charging points on a selection of
Onsite assets by 2025 and investigate onsite single let properties. On-site renewables have been introduced
renewables renewables on one asset by 2025 by way of solar PV panels at a property in West Bromwich
described in more detail below and are now being considered
across other assets within the portfolio
Zero waste to landfill from We are working with managing agents and contractors in order to
landlord-controlled waste by 2022 achieve this
Waste and
water Working with managing agents on initiatives in buildings such as
Reduce landlord-controlled water sensor taps, flow regulators,
consumption by 50% by 2025
reduced leakage, water saving showers
Engage with tenants during lease We have updated the green clause to include renewable energy as
negotiations to incorporate standard and our lawyers are using this when drafting new leases
sustainability clauses into new leases
Tenant
engagement
Engage with tenants on quarterly basis Tenant benchmark reports were circulated in June 2021 for the
on ESG issues first time which has led to positive feedback
Achieve EPRA Gold Standard for the year Achieved
External ended 31 March 2021
reporting
Appropriate disclosures were made in the 2021 Annual Report.
Although TCFD are not mandatory for the Company, reporting will
Report to TCFD by 2021 continue to be developed in the current financial year following
TCFD guidance where considered appropriate
Due diligence
Investment Committee reports for any new property acquisition/
refurbishment now include
Incorporate ESG factors into all
investment due diligence undertaken dedicated ESG rationale detailing improvements to be made
alongside relevant capital expenditure
Case study
During the Period we completed a comprehensive refurbishment of an industrial unit in West Bromwich which involved installing six electric vehicle charging points, solar photovoltaic coverage to over 700 sq m of the roof area, air source heat pumps to provide heating and hot water, new energy efficient radiators and LED lights with passive infrared sensors. The refurbishment is expected to increase the EPC rating from C (69) to a high B, with the ERV of the property increasing from GBP280k pa (GBP4.80 per sq ft) to GBP345k pa (c.GBP6.00 per sq ft). Once re-let we expect the uplift in property valuation will be well in excess of the capital outlay for refurbishment.
We expect to commence the redevelopment of an industrial asset in Redditch to BREEAM 'Excellent' standard, once it becomes vacant in January 2022, with further initiatives planned as we continue to invest in our property portfolio to minimise its environmental impact and maximise shareholder value.
EPC ratings
During the Period the Company has updated EPCs at 20 units across 14 properties covering 272k sq ft for properties where existing EPCs had expired or where works had been completed, and at the Period end have a weighted average EPC rating of C (62) (31 March 2021: C (63)). For updated EPCs, there was an aggregate improvement in the rating of 16 energy performance asset rating points[21]. Some of the properties showing an improvement are detailed below:
-- Burton upon Trent - a new Starbucks drive through restaurant was built on the site of a former tool hirecentre, improving the EPC score from D (99) to B (43)
-- Daventry - a significant refurbishment of this industrial property was carried out during the year,improving the EPC score from C (52) to B (46)
-- Glasgow West George Street - a refurbishment of these offices improved the EPC score from E (62) to B(34)
The Company's weighted average EPC score is shown below:
31 Mar
30 Sept 2021 30 Sept 2020
2021
GBP000 GBP000
EPC rating GBP000
A 1% 1% 1%
B 17% 12% 15%
C 43% 40% 43%
D 29% 29% 30%
E 9% 14% 11%
F 1% 2% -
G - 1% -
Outlook
The Committee is pleased with the progress made on the Company's environmental credentials during the Period, in particular the continued improvement in the weighted average EPC rating and looks forward to the Company making further progress against its environmental KPIs over the remainder of the financial year. Approval
This report was approved by the Committee and signed on its behalf by:
Hazel Adam
Chair of the ESG Committee
29 November 2021
Property portfolio
Location Tenant % Portfolio Income[22]
INDUSTRIAL
Winsford H&M 1.5%
Ashby Teleperformance 1.3%
Burton ATL Transport 1.2%
Salford Restore 1.1%
Hilton Daher Aerospace 1.0%
Doncaster Silgan Closures 1.0%
Eurocentral Next 0.9%
Warrington Life Technologies 0.9%
Milton Keynes Massmould 0.9%
Tamworth ICT Express 0.9%
Kettering Multi-let 0.9%
Normanton Yesss Electrical 0.8%
Biggleswade Turpin Distribution 0.8%
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Warrington Procurri Europe and Synertec 0.8%
Cannock HellermannTyton 0.8%
Bellshill Yodel 0.8%
Daventry Multi-Color 0.7%
Edinburgh Menzies Distribution 0.7%
Gateshead Worthington Armstrong 0.7%
Plymouth Sherwin-Williams 0.7%
Nuneaton DX Network Service 0.6%
Milton Keynes Saint Gobain Building Distribution 0.6%
Avonmouth Superdrug 0.6%
Bristol BSS Group 0.6%
Coventry Royal Mail 0.6%
Manchester Unilin Distribution 0.6%
Bedford Heywood Williams Components 0.6%
Glasgow Menzies Distribution 0.6%
Weybridge Menzies Distribution 0.6%
Knowsley Multi-let 0.6%
Aberdeen Menzies Distribution 0.6%
Hamilton Ichor Systems 0.6%
Stevenage Morrison Utility Services 0.6%
Cambuslang Brenntag 0.5%
Livingston A Share & Sons (t/a SCS) 0.5%
Oldbury Sytner 0.5%
Warwick Semcon 0.5%
Farnborough Green Retreats 0.4%
Norwich Menzies Distribution 0.4%
Coalville MTS Logistics 0.4%
Erdington West Midlands Ambulance Service 0.4%
Langley Mill Warburtons 0.4%
Ipswich Menzies Distribution 0.4%
Irlam Northern Commercials 0.4%
Sheffield Parkway Synergy Health 0.4%
Castleford Bunzl 0.4%
Liverpool, Speke Powder Systems 0.4%
Hilton Multi-let 0.3%
Swansea Menzies Distribution 0.3%
Leeds Tricel Composites 0.3%
Sheffield Arkote 0.3%
Kettering Sealed Air 0.3%
Atherstone North Warwickshire Borough Council 0.3%
Liverpool, Speke DHL International 0.3%
Huntingdon PHS Group 0.3%
Dundee Menzies Distribution 0.3%
Glasgow DHL Global Forwarding 0.3%
Normanton Acorn Web Offset 0.3%
Sheffield ITM Power 0.3%
Kilmarnock Royal Mail 0.2%
Sheffield River Island 0.1%
Knowsley, Leeds, Redditch, Warrington and West VACANT 4.3%
Bromwich
40.4%
OFFICE
West Malling Regus (Maidstone West Malling) 1.6%
Oxford Multi-let 1.4%
Birmingham Multi-let 1.0%
Leicester Galliford Try, Regus (Leicester Grove Park) and 1.0%
SpaMedica
Sheffield Secretary of State for Communities and Local 0.9%
Government
Castle Donnington National Grid 0.8%
Leeds First Title (t/a Enact) 0.8%
Cheadle Wienerberger 0.8%
Leeds First Title (t/a Enact) 0.8%
Leicester Countryside Properties and Erskine Murray 0.7%
Derby Edwards Geldards 0.6%
Solihull Lyons Davidson 0.5%
Glasgow Multi-let 0.4%
Manchester Fourthline, Meridian Healthcomms and Venditan 0.4%
Birmingham, Glasgow, Leicester and Manchester VACANT 1.3%
13.0%
OTHER
Stockport Williams Motor Co 1.6%
Liverpool Liverpool Community Health NHS Trust and Royal Base 1.0%
Restaurants
Perth Bannatyne Fitness, Scotco Eastern (t/a KFC) and TH 1.0%
UK (t/a Tim Hortons)
Derby VW Group 0.8%
Crewe Mecca Bingo, Mecca Bingo (sublet to Odeon Cinemas) 0.8%
and Pizza Hut
Stafford VW Group 0.7%
Stoke Nuffield Health 0.7%
Lincoln Total Fitness Health Clubs 0.7%
Torquay Multi-let 0.7%
Gillingham Co-Op 0.7%
York Pendragon 0.6%
Salisbury Parkwood Health & Fitness 0.5%
Shrewsbury VW Group 0.5%
Lincoln MKM Buildings Supplies 0.5%
Crewe Multi-let 0.4%
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Loughborough Listers Group 0.4%
Bath Chokdee (t/a Giggling Squid) 0.3%
Castleford MKM Buildings Supplies 0.3%
High Wycombe Stonegate Pub Co 0.3%
Maypole Starbucks 0.3%
Shrewsbury - TJ Vickers TJ Vickers & Sons 0.3%
Nottingham Kbeverage (t/a Starbucks) 0.3%
Carlisle The Gym Group 0.3%
Portishead AGO Hotels 0.3%
Shrewsbury Ask Italian and Sam's Club (t/a House of the Rising 0.3%
Sun)
Plymouth McDonald's 0.2%
Portishead JD Wetherspoons 0.2%
King's Lynn Loungers 0.1%
Stratford The Universal Church of the Kingdom of God 0.1%
Burton 1 Oak (t/a Starbucks) 0.1%
Chesham Bright Horizons Family Solutions 0.1%
Knutsford Knutsford Day Nursery 0.1%
Leicester Pizza Hut 0.1%
Watford Pizza Hut 0.1%
Crewe VACANT 0.5%
15.9%
RETAIL
Worcester Superdrug 0.9%
Cardiff Multi-let 0.9%
Portsmouth Poundland, Sportswift and Your Phone Care 0.6%
Southampton URBN UK 0.6%
Colchester H Samuel, Leeds Building Society and Lush 0.4%
Guildford Reiss 0.4%
Southsea Portsmouth City Council and Superdrug 0.4%
Birmingham Multi-let 0.4%
Chester Felldale Retail (t/a Lakeland) and Signet Trading 0.3%
(t/a Ernest Jones)
Shrewsbury Holland & Barrett and Greggs 0.3%
Norwich Specsavers 0.3%
Edinburgh Phase Eight 0.3%
Chester Aslan Jewellery and Der Touristik 0.3%
Portsmouth The Works 0.3%
Shrewsbury Nationwide Building Society 0.3%
Stratford Foxtons 0.2%
Taunton Wilko Retail 0.2%
Bury St Edmunds The Works 0.2%
Colchester Kruidvat Real Estate (t/a Savers) 0.2%
St Albans Crepeaffaire 0.2%
Cirencester Brook Taverner and The Danish Wardrobe Co (t/a Noa 0.2%
Noa)
Weston-super-Mare Superdrug 0.2%
Bury St Edmunds Savers Health & Beauty 0.1%
Chester Ciel (Concessions) (t/a Chesca) 0.1%
Cheltenham Done Brothers (t/a Betfred) 0.1%
Chester, Colchester, Glasgow, Guildford, VACANT 1.3%
Portsmouth and Shrewsbury
9.7%
RETAIL WAREHOUSE
Evesham Multi-let 2.2%
Carlisle Multi-let 2.0%
Weymouth B&Q, Halfords and Sports Direct 1.9%
Winnersh Pets at Home and Wickes 1.4%
Burton CDS Superstores (t/a The Range) and Wickes 1.3%
Swindon B&M, Go Outdoors and InstaVolt 1.3%
Leicester Matalan 1.2%
Banbury B&Q 1.2%
Ashton-under-Lyne B&M 1.0%
Plymouth B&M, Magnet and InstaVolt 1.0%
Plymouth A Share & Sons (t/a SCS) and Oak Furniture Land 0.9%
Gloucester InstaVolt, Magnet and Smyths Toys 0.9%
Sheldon Multi-let 0.9%
Leighton Buzzard Homebase 0.8%
Leicester Magnet 0.6%
Torpoint Sainsburys 0.5%
Portishead InstaVolt, Majestic Wine Warehouse and TJ Morris t/ 0.5%
a Homebargains
Grantham Carpetright, InstaVolt and Poundstretcher 0.4%
Grantham and Milton Keynes VACANT 1.0%
21.0%
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2021
Audited
Unaudited Unaudited
12
6 months 6 months months
to 30 Sept to 30 Sept to 31
2021 2020 Mar
2021
Note GBP000 GBP000 GBP000
Revenue 4 20,152 20,286 39,578
Investment management fee (1,788) (1,653) (3,331)
Operating expenses of rental property
(914)
-- rechargeable to tenants (882) (892)
-- directly incurred (1,708) (3,781) (5,559)
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Professional fees (262) (195) (489)
Directors' fees (145) (115) (218)
Administrative expenses (356) (310) (551)
Expenses (5,141) (6,946) (11,062)
Operating profit before financing and revaluation of investment property
15,011 13,340 28,516
Unrealised gains/(losses) on revaluation of investment property:
- relating to gross property revaluations
9 32,310 (27,388) (19,611)
-- relating to acquisition costs 9 (1,069) (69) (707)
Net valuation increase/decrease 31,241 (27,457) (20,318)
Profit on disposal of investment property 4,165 485 393
Net profit/(losses) on investment property 35,406 (26,972) (19,925)
Operating (loss)/profit before financing 50,417 (13,632) 8,591
Finance income 5 - 27 61
Finance costs 6 (2,347) (2,471) (4,903)
Net finance costs (2,347) (2,444) (4,842)
Profit/(loss) before tax 48,070 (16,076) 3,749
Income tax 7 - - -
(Loss)/profit and total comprehensive (expense)/income for the Period, net
of tax
48,070 (16,076) 3,749
Attributable to:
Owners of the Company 48,070 (16,076) 3,749
Earnings per ordinary share:
Basic and diluted (p) 3 11.4 (3.8) 0.9
EPRA (p) 3 3.0 2.6 5.6
The profit/(loss) for the Period arises from the Company's continuing operations. Condensed consolidated statement of financial position
As at 30 September 2021
Registered number: 08863271
Unaudited Unaudited Audited
30 Sept 30 Sept 31 Mar
2021 2020 2021
Note GBP000 GBP000 GBP000
Non-current assets
Investment property 9 565,279 532,250 551,922
Total non-current assets 565,279 532,250 551,922
Current assets
Trade and other receivables 10 6,452 7,754 6,001
Cash and cash equivalents 12 37,139 26,205 3,920
Total current assets 43,591 33,959 9,921
Total assets 608,870 566,209 561,843
Equity
Issued capital 14 4,206 4,201 4,201
Share premium 251,015 250,469 250,469
Retained earnings 190,648 145,032 155,196
Total equity attributable to equity holders of the Company
445,869 399,702 409,866
Non-current liabilities
Borrowings 13 145,713 148,493 138,604
Other payables 571 575 572
Total non-current liabilities 146,284 149,068 139,176
Current liabilities
Trade and other payables 11 10,098 10,653 6,185
Deferred income 6,619 6,786 6,616
Total current liabilities 16,717 17,439 12,801
Total liabilities 163,001 166,507 151,977
Total equity and liabilities 608,870 566,209 561,843
These interim financial statements of Custodian REIT plc were approved and authorised for issue by the Board of Directors on 29 November 2021 and are signed on its behalf by:
David Hunter
Director
Condensed consolidated statement of cash flows
For the six months ended 30 September 2021
Audited
Unaudited Unaudited
12
6 months 6 months months
to 30 Sept to 30 Sept to 31
2021 2020 Mar
2021
Note GBP000 GBP000 GBP000
Operating activities
Profit/(loss) for the Period 48,070 (16,076) 3,749
Net finance costs 5,6 2,347 2,444 4,842
Net revaluation (profit)/loss 9 (31,241) 27,457 20,318
Profit on disposal of investment property (4,165) (485) (393)
Impact of lease incentives 9 (741) (877) (1,932)
Amortisation 4 4 7
Income tax 7 - - -
Cash flows from operating activities before changes in working capital and
provisions
14,274 12,467 26,591
Increase in trade and other receivables (451) (2,457) (704)
Increase/(decrease) in trade and other payables 3,913 2,576 (2,065)
Cash generated from operations 3,462 12,586 23,822
Interest and other finance charges (2,176) (2,301) (4,556)
15,560 10,285
Net cash flows from operating activities 19,266
Investing activities
Purchase of investment property (12,217) (900) (11,443)
Capital expenditure and development (1,803) (348) (2,308)
Acquisition costs (1,069) (69) (707)
Proceeds from the disposal of investment property 38,299 2,800 4,422
Costs of disposal of investment property (424) (15) (69)
Interest received and similar income 5 - 27 61
Net cash flows from/(used in) investing activities 22,786 1,495 (10,044)
Financing activities
Proceeds from the issue of share capital 558 - -
Costs of the issue of share capital (5) - -
New borrowings 13 7,000 - (10,000)
New borrowings origination costs 13 (62) - (66)
Dividends paid 8 (12,618) (10,974) (20,635)
Net cash flows (used in)/from financing activities (5,127) (10,974) (30,701)
33,219 806
Net increase in cash and cash equivalents (21,479)
Cash and cash equivalents at start of the Period 3,920 25,399 25,399
Cash and cash equivalents at end of the Period 37,139 26,205 3,920
Condensed consolidated statements of changes in equity
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