DJ Custodian Property Income REIT plc: Q2 trading update shows active asset management and diversified portfolio continuing to drive income and valuation growth, underpinning fully covered dividend
Custodian Property Income REIT plc (CREI)
Custodian Property Income REIT plc: Q2 trading update shows active asset management and diversified portfolio
continuing to drive income and valuation growth, underpinning fully covered dividend
13-Nov-2025 / 07:00 GMT/BST
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13 November 2025
Custodian Property Income REIT plc
("Custodian Property Income REIT" or "the Company")
Q2 trading update shows active asset management and diversified portfolio continuing to drive income and valuation
growth, underpinning fully covered dividend
Custodian Property Income REIT (LSE: CREI), which seeks to deliver an enhanced income return by investing in a
diversified portfolio of smaller, regional properties with strong income characteristics across the UK, today provides
a trading update for the second quarter ended 30 September 2025 ("Q2" or the "Quarter").
Commenting on the trading update, Richard Shepherd-Cross, Managing Director of the Investment Manager, said: "The
direct property market has been witnessing a recovery since September 2024, with valuations improving quarter on
quarter for Custodian Property Income REIT, driven by consistent rental growth across all real estate sectors in the
UK. As a result, the diversified nature of our portfolio is well positioned to benefit from the upside of both the real
estate recovery and the improving market sentiment towards listed markets.
"Despite uncertainty leading into the November 2025 Budget, the Company has continued to deliver another quarter of
stable earnings, fully covering our dividend, with like-for-like passing rent growing by 2.3% through active asset
management initiatives and the leasing of vacant space. Logic suggests that the strong performance of our underlying
assets should flow through to narrowing the share price discount. However, a continued shift in sentiment is required
alongside a willingness to consider the longer term income-focused opportunity that exists in listed real estate, with
Custodian Property Income REIT currently offering an attractive c.7.5% dividend yield secured against a broadly
diversified, well-let, reversionary portfolio of modern, regional properties.
"Looking ahead, we will continue to pursue opportunities to invest in our existing portfolio and grow through selective
corporate acquisitions, such as the all-share acquisition of the Merlin portfolio in May 2025. At the same time we will
continue to actively recycle capital to strengthen the portfolio and increase NAV, facilitated by our share buy-back
programme through which we have been selling assets at a premium to valuation while undertaking the timely acquisition
of shares at a discount to the same metric."
Highlights
Strong leasing activity continues to improve occupancy and drive rental growth, supporting a fully covered dividend
-- 1.5p dividend per share approved for the Quarter, fully covered by unaudited European Public Real Estate
Association ("EPRA") earnings per share[1], in line with the target of at least 6.0p for the year ending 31 March
2026 (FY25: 6.0p). This target dividend represents a 7.3% yield based on the prevailing 82.0p share price[2] and is
in line with the Company's goal of being the REIT of choice to investors seeking high and stable dividends from
well-diversified UK real estate
-- EPRA earnings per share of 1.5p for the Quarter (Q1: 1.5p)
-- During the Quarter, like-for-like[3] ERV increased by 1.1%, primarily driven by 0.9% like-for-like growth in the
industrial sector, which represents 43% of the portfolio by income. Portfolio like-for-like ERV has grown 1.9% so
far this financial year.
-- 13% additional income growth already embedded within the portfolio with ERV of GBP51.9m (30 June 2025: GBP51.5m)
exceeding the current passing rent of GBP45.9m (30 June 2025: GBP44.9m)
-- Based on our track record and strong occupier demand for space, we expect to capture this potential rental upside
at (typically) five-yearly rent reviews or on re-letting, while continuing to drive passing rent and ERV growth
further through asset management initiatives
-- Positive leasing activity during the Quarter comprised:
- Letting five vacant units with annual rent of GBP645k (1.2% of ERV), including an industrial unit in Plymouth
where a GBP2.5m refurbishment has led to a 66% increase in annual rent to GBP0.5m. These lettings helped improve
EPRA occupancy[4] to 92.2% (30 June 2025: 90.9%); and
- Seven lease renewals and regears 4% ahead of ERV and 39% ahead of previous passing rent, in aggregate.
-- GBP0.2m (Q1: GBP0.1m) of revenue generated from solar panel arrays across 12 assets, selling the renewable electricity
generated to tenants and exporting any surplus.
Continued valuation growth across the Company's c.GBP625m portfolio, with a 1.4% increase on a like-for-like basis
-- Q2 net asset value ("NAV") total return per share[5] of 3.8%
-- NAV per share increased to 98.9p (30 June 2025: 96.7p)
-- NAV increased to GBP456.3m (30 June 2025: GBP448.7m), primarily due to valuation increases across all key property
sectors
-- The value of the Company's investment property portfolio was GBP625.0m (30 June 2025: GBP614.7m), a like-for-like
valuation increase of 1.4% during the Quarter, net of GBP3.7m of capital expenditure.
Ongoing capital investment programme continues to enhance the portfolio, and asset recycling from the Merlin
acquisition continues to be accretive
-- During the Quarter, the Company sold:
- A retail unit in Guildford for GBP1.6m, representing a 6.25% premium to the 30 June 2025 valuation; and
- A retail unit in Leicestershire for GBP0.4m, generating a 9% premium to the allocated purchase price. This
property was sold at auction having been earmarked for disposal when acquired as part of the Merlin Portfolio.
-- Post period end a further six assets in Leicestershire, acquired as part of the Merlin Portfolio, were sold for an
aggregate GBP2.4m. Two assets were sold to special purchasers, which helped deliver aggregate proceeds GBP0.7m (41%)
ahead of the allocated purchase price.
-- GBP3.7m of capital expenditure primarily relating to the refurbishment of industrial buildings in Plymouth and
Biggleswade, including the installation of solar panels and electric vehicle chargers, window replacement and
installation air source heat pumps, which both increases rental income and improves environmental performance.
-- Five solar panel arrays were independently valued for the first time during the Quarter, having been in operation
for 12 months, resulting in a GBP1.6m (124%) valuation uplift on cost.
Prudent debt levels
-- Net gearing[6] was 26.4% loan-to-value at 30 Sept 2025 (30 June 25: 26.9%)
-- GBP173.5m (30 June 2025: GBP172m) of drawn debt at 30 Sept 2025, comprising GBP120m (69%) of fixed rate debt and GBP53.5m
(31%) drawn under the Company's GBP60m variable rate revolving credit facility ("RCF")
-- Weighted average cost ("WAC") of aggregate borrowings increased to 4.0% (30 June 2025: 3.8%) due to the Company
utilising its RCF to repay a GBP20m fixed rate loan that expired on 13 August 2025. The Company's remaining GBP120m of
longer-term fixed-rate debt facilities have a weighted average term of 5.3 years and a WAC of 3.3%, offering
significant medium-term interest rate risk mitigation.
Dividends
The Company paid an interim dividend per share of 1.5p on Friday 29 August 2025 relating to Q1, fully covered by EPRA
earnings.
The Board has approved a fully covered interim dividend per share of 1.5p for the second quarter to be paid on Friday
28 November 2025 to shareholders on the register on 7 November 2025, designated as a property income distribution
("PID").
The Board is targeting a dividend per share of no less than 6.0p for the year ending 31 March 2026.
Net asset value
The Company's unaudited NAV increased to GBP456.3m, or approximately 98.9p per share, at 30 September 2025:
Pence per share GBPm
NAV at 30 June 2025 96.7 448.7
Shares repurchased 0.1 (1.7)
96.8 447.0
Net income for the Quarter 1.5 7.1
Interim quarterly dividends paid during the Quarter relating to FY25 Q4[7] (1.5) (7.0)
Valuation increases and depreciation 2.1 9.1
Profit on disposal - 0.1
NAV at 30 Sept 2025 98.9 456.3
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DJ Custodian Property Income REIT plc: Q2 trading update shows active asset management and diversified portfolio continuing to drive income and valuation growth, underpinning fully covered dividend -2-
The unaudited NAV attributable to the ordinary shares of the Company is calculated under International Financial Reporting Standards and incorporates the independent portfolio valuation at 30 September 2025 and net income for the Quarter.
The movement in unaudited NAV reflects the payment of an interim dividend per share of 1.5p during the Quarter, but as usual this does not include any provision for the approved dividend of 1.5p per share for the Quarter under review to be paid on Friday 28 November 2025.
Market update
The Bank of England's decision to hold interest rates at 4% despite persistent inflation and weak growth has done little to convince investors to break cover and commit new funds to UK listed real estate. As a result, share prices continue to show a wide discount to NAV across the whole of listed real estate with an average discount, as reported by Newmark, of 28.6%[8].
This compares to a discount of 17%[9] for Custodian Property Income REIT, which offers an opportunity to invest ahead of both a real estate recovery and improving market sentiment, while securing a c.7.3% dividend yield that is underpinned by a broadly diversified, well-let, reversionary portfolio of modern, regional properties in strong locations.
The direct property market has been witnessing a recovery since September 2024, with valuations improving quarter-on-quarter, driven by rental growth across all sectors of the property market. Logic suggests that the strong performance of the underlying assets should flow through to listed property companies' share prices, but a further shift in market sentiment is required along with a willingness to consider the longer term opportunity that exists in real estate.
At a property level, Custodian Property Income REIT is delivering on all fronts to provide shareholders with strong income returns. Quarterly NAV increased by c.2%, driven by property valuation growth, six lease renewals with an average 35% increase in rent, six new lettings of vacant units securing GBP1.0m of rent and two rent reviews showing a 3% aggregate increase.
During the Quarter, the portfolio's rent roll grew 2.3% on a like-for-like basis, from GBP44.9m to GBP45.9m. As a result, the portfolio has continued to deliver a fully covered dividend of 6p per share, with future rental growth potential of 13% already embedded and offering the potential for further earnings growth, while profitable sales fund capital expenditure and refurbishment programmes, in addition to proving valuations.
Asset management
Custodian Capital Limited, the Investment Manager, has remained focused on active asset management during the Quarter, completing:
-- Seven lease renewals and regears, in aggregate 4% ahead of ERV and 39% ahead of previous passing rent; -- Letting five vacant units with annual rent of GBP645k (1.2% of ERV); and -- Two rent reviews with an aggregate 3% increase in annual rent (GBP10k), in line with ERV;
Further details of these asset management initiatives are shown below:
Renewals/regears
-- Five-year lease renewal with Yodel Delivery Network at an industrial unit in Bellshill, with a tenant option to
break in the third anniversary, increasing the annual rent by 65% to GBP510k, 23% ahead of ERV; -- 15-year lease to Sainsbury's at a retail warehouse unit in Cromer, increasing the annual rent by 49% to GBP325k; -- Five-year lease renewal with Argos at a retail warehouse unit in Evesham, with annual rent lowered 7% from GBP182k to
GBP168k to reflect prevailing market rates; -- 10-year lease renewal with Nationwide Building Society at a retail unit in Winchester, decreasing annual rent 19%
to GBP115k in line with prevailing market rates. Properties at Evesham and Winchester were known to be over-rented on
acquisition so these rental decreases were priced in and expected. -- 10-year reversionary lease with Farmfoods at a retail warehouse unit in Gloucester, maintaining the annual rent at
GBP70k, but simultaneously removing the 2027 tenant break option; and -- Five-year lease renewal with Engineering Solutions and Automations at an industrial unit in Knowsley, increasing
the annual rent 51% to GBP78k; -- 10-year lease renewal to On Tower UK, for a telephone mast at a retail park in Evesham, at an annual rent of GBP2.5k,
in line with prevailing market rates.
New leases
GBP1.0m of new annual rental income was added to the rent roll through the letting of six vacant units, in aggregate, in line with ERV:
-- 66% increase in annual rent to GBP465k with the signing of a 25-year lease to Altilium Metals at a recently
refurbished industrial unit in Plymouth, with a tenant break option in the eighth and fifteenth years. The
refurbishment cost c.GBP2.5m and resulted in the building achieving an EPC score of 'A' which was an important factor
in securing the tenant; -- 10-year lease to Harmony Fire at an office suite in Edinburgh, with a tenant break option in the fifth year of the
term, increasing annual rent by 18% to GBP112k; -- 10-year lease to MP Bio Science at an industrial unit in Hilton, with a tenant break option in the fifth year of
the term, increasing the annual rent by 11% to GBP51k; -- 15-year lease to EV Charger Points at a retail park in Southport, at an annual rent of GBP12k; and -- 30% increase over previous passing rent achieved with a three-year lease to Ormerod Rutter at an office suite in
Birmingham, with an annual rent GBP5.5k.
Rent reviews
-- An industrial unit in Burton, maintaining passing rent at GBP337k; -- An industrial unit in Aberdeen, increasing passing rent by 35% from GBP30k to GBP40k.
-- Since the Quarter-end Ichor Systems has surrendered the remaining 3.5 years of its lease at an industrial unit in
Hamilton for a premium of GBP950k (equivalent to 3.25 years of passing rent), along with completing dilapidations
works of c.GBP1.0m. This surrender premium will increase FY26 Q3 EPRA earnings per share by c. 0.2p. The completion
of dilapidations works and a light refurbishment is expected to increase the unit's ERV by approximately 10-15%,
and due to a lack of local supply we are optimistic regarding its re-letting potential.
Disposals
During the Quarter the Company sold:
-- A retail unit in Guildford for GBP1.6m, GBP0.1m ahead of the 30 June 2025 valuation; and -- A retail unit in Leicestershire for GBP0.4m, generating a 9% premium to purchase price. This property was sold at
auction having been earmarked for disposal when acquired as part of the Merlin Portfolio.
Since the Quarter end, the company has sold six properties across Leicestershire that were acquired as part of the Merlin acquisition for GBP2.4m. Two assets were sold to special purchasers, which helped deliver aggregate proceeds GBP0.7m (41%) ahead of the allocated purchase price.
Proceeds from the disposals has been used to pay down variable rate debt.
Share capital
Share buyback programme
During the Quarter, the Company implemented a share buyback programme with an initial maximum aggregate consideration of GBP5.0m ("the Buyback Programme"). During the higher interest rate environment since 1 April 2023, the Company has prioritised re-investment of proceeds from selective disposals in funding capital expenditure to improve the quality and environmental credentials of the portfolio and to pay down variable rate debt, aligning with the Company's strategy of providing shareholders with strong income returns. The Board believes the current share price materially undervalues the Company and its portfolio, including the security and quality of income offered through the fully covered dividend. Under the Buyback Programme, shares will only be purchased if the Directors believed it would result in an increase in earnings per share, or an increased NAV per share (or both) for remaining shareholders. At the current share price, and given the latest expectations for future interest rates, the Directors believe the Buyback Programme continues to be an attractive use of property disposal proceeds that will create value for shareholders.
To 11 November 2025, the Company has purchased a total of 3.7m shares under the Buyback Programme, which are held in treasury. Aggregate consideration for these buybacks was GBP3.0m at a weighted average cost per share of 78.3p, representing an average 18.0% discount to prevailing NAV.
Deferred consideration relating to the acquisition of Merlin Properties Limited
Since the Quarter-end, the Company has issued 1.2m new shares in the Company at 92p per share as final consideration for the corporate acquisition of Merlin Properties Limited ("Merlin") which completed on 30 May 2025.
Borrowings
During the Quarter, the Company utilised its RCF to repay the GBP20m fixed rate loan with SWIP which expired on 13 August 2025.
At 30 September 2025, the Company had GBP173.5m of debt drawn comprising:
-- GBP53.5m (31%) at a variable prevailing interest rate of 5.8% and a remaining maturity of 2.1 years; and -- GBP120m (69%) at a weighted average fixed rate of 3.3% with a weighted average maturity of 5.3 years.
At 30 September 2025, the Company's borrowing facilities were:
Variable rate borrowing
-- A GBP60m RCF with Lloyds with interest of between 1.62% and 1.92% above SONIA, determined by reference to the
prevailing LTV ratio of a discrete security pool of assets, expiring on 10 November 2027. The facility limit can be
increased to GBP75m with Lloyds' approval.
Fixed rate borrowing
-- A GBP45m term loan with SWIP repayable on 5 June 2028 with interest fixed at 2.987%; and
-- A GBP75m term loan with Aviva comprising:
- A GBP35m tranche repayable on 6 April 2032 with fixed annual interest of 3.02%;
- A GBP25m tranche repayable on 3 November 2032 with fixed annual interest of 4.10%; and
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