Net Asset Value as at 31 March 2015

RNS Number : 7735K

Custodian REIT PLC

21 April 2015

 

21 April 2015

Custodian REIT plc

("Custodian REIT" or "the Company")

Net Asset Value as at 31 March 2015

Custodian REIT (LSE: CREI), the UK commercial real estate investment company which listed on the main market of the London Stock Exchange on 26 March 2014 ("Admission"), today reports its unaudited net asset value ("NAV") as at 31 March 2015 and highlights for the period from 1 January 2015 to 31 March 2015 ("the Period").  

Financial highlights

·     NAV per share 101.2p (31 December 2014: 100.2p)

·     £22.6m raised from issue of equity (before costs and expenses) and £10.0m term debt drawn down during the Period

·     £24.3m of debt facilities deployed (31 December 2014: £22.5m) resulting in net gearing¹ of 11.4% (31 December 2014: 12.1%)

·     Q3 dividend paid 31 March 2015 at 1.25p per share

·     NAV total return² since Admission of 6.9%

1 Borrowings less cash divided by portfolio valuation

2 NAV movement including dividends paid

Portfolio highlights

·     Portfolio value of £207.0m (31 December 2014: £180.2m)

·     Nine acquisitions completed during the Period for total consideration of £25.8m

 

Net asset value

The unaudited NAV of the Company at 31 March 2015 was £179.8 million, reflecting approximately 101.2 pence per share, an increase of 1.0% since 31 December 2014:

	Pence per share	£m
NAV at 31 December 2014	100.2	156.2
Issue of equity	0.3	22.3
	100.5	178.5
Valuation uplift in property portfolio	1.2	2.0
Impact of acquisition costs	(0.8)	(1.5)
Unrealised valuation movement	100.9	179.0
Income earned for the period	2.0	3.6
Expenses for the period	(0.4)	(0.9)
Dividends paid	(1.3)	(1.9)
NAV at 31 March 2015	101.2	179.8

The NAV attributable to the ordinary shares of the Company is calculated under International Financial Reporting Standards and incorporates the independent portfolio valuation as at 31 March 2015 and income for the quarter, but does not include any provision for the interim dividend for the final quarter, to be paid in June 2015.

Activity during the Period has continued to focus on acquisitions, with the aim of deploying new monies raised from the recent placing and increasing gearing towards the target level of 25%.  This investment impacts NAV to the extent that acquisition costs have partially offset the upward movement in valuations at the reporting date. 

The quarterly portfolio valuation uplift of £2.0 million and improvement in NAV are in line with the Board's expectations. 

Commenting on performance, Richard Shepherd-Cross, Managing Director of Custodian Capital Limited (the Company's external fund manager), said:

"The property market has made a strong start to 2015, witnessing unrelenting demand due to the extraordinary flows of money into the open-ended retail property funds.  It has been reported that net inflows were over £235 million in January and £300 million in February.  This follows on from £3.8 billion of net inflows in 2014, which exceeded peak inflows in 2006.  This dynamic, combined with tighter supply than in Q4 2014, has put continued upward pressure on pricing.

"Against this backdrop we were delighted to complete £25.8 million of acquisitions in Q1 2015, taking total investment in the 12 months since IPO to £107.3 million, more than doubling the size of the initial £95 million portfolio. Achieving this level of investment at an average net initial yield of over 7.5% while maintaining both the quality of property and length of income demonstrates the success of the Company's strategy of focusing on smaller lots in strong, regional markets.  Despite incurring significant acquisition costs in achieving this growth, NAV has increased and the portfolio profile has improved in respect of tenant, sector and lease break/expiry.  As a result, I believe the potential for rental growth and further consequential NAV growth has increased.

"We expect the target dividend for this financial year to be fully covered by earnings (excluding costs associated with Admission).  Full deployment of the Company's undrawn debt facilities and its capacity for new debt should improve dividend cover as we continue the investment programme.  We continue to enjoy a strong pipeline of opportunities and remain confident we can acquire properties that meet the Company's investment criteria and improve the portfolio mix.  During 2015 the occupational market will face a limited supply of modern, vacant space but with development coming on stream, increasing tenant demand, widespread rental growth and low vacancy rates, all of which help support the Company's strategy."

The performance of the fund will be detailed in the 31 March 2015 annual report, which will be released in June 2015. 

For details of all properties in the portfolio please see www.custodianreit.com/property/portfolio.php. 

Financing

Equity

A share placing was completed on 12 February 2015, raising £22.6 million (before costs and expenses) through the issue of 21,750,000 new ordinary shares of 1p each in the capital of the Company ("the New Shares") under the Placing Programme established in the Company's February 2014 prospectus.  The New Shares were issued at 104.0 pence per share, which the Board and the Fund Manager considered represented a premium of approximately 5% to the NAV per share at 31 December 2014, after adjusting the NAV to recognise the third quarter dividend of 1.25 pence per share paid to shareholders on the register at the close of business on 6 February 2015.

Debt

The Company operates a £25 million revolving credit facility with Lloyds Bank plc, which attracts interest of 2.45% above three month LIBOR and expires on 26 March 2019.  The Company also operates a £20 million term loan with Lloyds Bank plc, which attracts a blended interest of 1.95% above three month LIBOR and is repayable on 10 October 2019.

Dividends

An interim dividend of 1.25 pence per share for the quarter ended 31 December 2014 was paid on 31 March 2015.

The Board expects to propose an interim dividend for the final quarter of 1.5 pence per share to achieve the target dividend of 5.25 pence per share for the financial year ended 31 March 2015.

In the absence of unforeseen circumstances, the Board intends to pay further quarterly dividends to achieve the target dividend of 6.25 pence per share for the financial year ending 31 March 2016 and in subsequent financial years, implying an annualised dividend yield of 6.25% calculated by reference to the Company's issue price on Admission of 100 pence per share. 

Sector and geographic analysis as at 31 March 2015

Sector	Valuation  31 Mar  2015  £m	Quarter valuation movement £m	Weighting by income 31 Mar  2015	Weighting by income 31 Dec  2014
Industrial	93.0	1.7	45%	41%
Retail	48.2	(0.2)	22%	24%
Other3	41.7	0.5	18%	21%
Office	24.1	-	15%	14%
Total	207.0	2.0	100%	100%

3 Includes leisure, education and motor trade

The Company continues to have a strong focus on industrial property, while retaining its investment objective to maintain a suitably balanced portfolio.

Location	Valuation  31 Mar  2015  £m	Quarter valuation movement £m	Weighting by income 31 Mar  2015	Weighting by income 31 Dec  2014
South-East	43.3	0.6	20%	22%
West Midlands	33.7	0.4	15%	16%
East Midlands	30.3	0.2	17%	17%
North-West	28.5	0.5	13%	15%
North-East	25.5	-	13%	11%
South-West	19.5	0.2	8%	6%
Scotland	15.2	0.2	8%	6%
East Anglia	9.5	-	5%	6%
Wales	1.5	(0.1)	1%	1%
Total	207.0	2.0	100%	100%

The Company operates a geographically diversified portfolio across the UK, seeking to ensure that no one area represents the majority of the portfolio. 

- Ends -

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 / Nathan Imlach / Ian Mattioli	Tel: [phone]
	www.custodiancapital.com

Numis Securities Limited
Nathan Brown / Hugh Jonathan	Tel: [phone]
	www.numis.com/funds

Camarco
Ed Gascoigne-Pees	Tel: [phone]
	www.camarco.co.uk

Notes to Editors

Custodian REIT plc is a UK real estate investment trust ("REIT") listed on the London Stock Exchange.  The Company launched on 26 March 2014, acquiring a portfolio of £95 million of UK commercial property.  This was sourced from an existing portfolio of 48 properties held by clients of Mattioli Woods plc in a syndicated structure.  The diverse portfolio consisted of properties let to institutional grade tenants on long leases throughout the UK. 

The Company raised gross proceeds of £55 million through an initial public offering and has raised a further £47.6 million via two subsequent placings.  It invests in a diversified portfolio of UK commercial properties to achieve its investment objective of providing shareholders with an attractive level of income together with the potential for capital growth through a closed-ended fund. 

The target portfolio is characterised by small lot sizes with individual property values of less than £7.5 million at acquisition.  Custodian Capital Limited is the discretionary investment manager of the Company. 

For more information visit www.custodianreit.com and www.custodiancapital.com. 

Important notice

Forward looking statements: This announcement includes "forward-looking statements".  All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's business strategy and plans are forward-looking statements. 

Forward-looking statements are subject to risks and uncertainties and accordingly the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements.  These factors include but are not limited to those that are described in the February 2014 prospectus and December 2014 supplementary prospectus. 

These forward-looking statements speak only as at the date of this announcement.  The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Financial Services Act 2012, the Listing Rules or Prospectus Rules of the Financial Conduct Authority or other applicable laws, regulations or rules. 

Certain statements have been made with reference to forecast price changes, economic conditions and the current regulatory environment.  Nothing in this announcement should be construed as a profit forecast.  Past share price performance cannot be relied on as a guide to future performance. 

 

END

 

 

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