Custodian Property posts robust set of full-year results

Custodian Property Income REIT reported a robust full-year performance in its final results on Thursday, with EPRA earnings per share growing 3.6% to 5.8p, up from 5.6p in the prior year.

The London-listed real estate investment trust said like-for-like contracted rental income increased 5.6% to £43.1m, with rental revenue rising 3.9% to £42.2m.

It said the estimated rental value (ERV) of the portfolio grew 3.6%, now standing 15% ahead of passing rent, indicating potential for further rental growth through asset management and lease events.

The company completed 15 rent reviews across all sectors, achieving an average increase of 23% over previous passing rents.

Additionally, 47 new lettings, lease renewals, and lease regears were completed, adding £9.5m to the portfolio's valuation.

Occupancy rates improved to 91.7%, with further gains to approximately 93% since April 2024.

The portfolio valuation remained stable at £589.1m in the final quarter, with a modest 4% like-for-like decline over the full year.

Notably, £19m was invested in capital improvements, including refurbishments and EPC enhancements for offices in Leeds and Manchester, as well as Midlands industrial units.

Those investments led to a 21.7% increase in ERV for the upgraded properties.

Selective disposals generated £18.2m in proceeds, achieving an 8% premium to the last valuation, with an additional £11.3m in disposals since year-end at an average 49% premium to pre-offer valuation.

The company's net gearing remained low at 29.2%, with 78% of debt fixed and no expiries until August 2025.

Shareholders received a 5.5% increase in fully covered dividends, totaling 5.5p per share along with a 0.3p special dividend.

Looking ahead, the prospective dividend announced in May had been increased by 9% to 6p per share, reflecting the board's confidence in the company's prospects and commitment to a high dividend strategy supported by EPRA earnings.

“In my first annual results as chairman, I am very pleased to note the year to March 2024 as a significant milestone for the company, marking the 10 year anniversary since launch, and that the company once again performed well,” said chairman David MacLellan.

“Despite the significant challenges and changes we have all faced over the last decade, politically, economically and in terms of social volatility including Covid, Custodian Property Income REIT has grown successfully and delivered on its objectives with an over sixfold increase in the size of the portfolio, an average annual NAV total return of 5.5%, an annual average fully covered dividend of 5.9p per share and a decreasing ongoing charges ratio.

“This success has been achieved by the Company’s resolute focus on being fully invested in a portfolio of below institutional lot-sized regional properties to capture the income advantages that these types of assets afford, in order to deliver enhanced income-centric total returns to institutional, wealth management and private investors.”

MacLellan said the firm’s portfolio was “well placed” to benefit from any upwards rerating in sector valuations as the economy improved.

“In an inflationary environment and with a lack of supply of modern, smaller regional properties we expect to see continued rental growth over the year ahead and it will be this growth in income that is likely to form the greater component of total return over the next phase of the property market and we believe that Custodian Property Income REIT’s strong income yielding portfolio, supported by higher-than-peer group recurring earnings per share, will continue to underpin shareholder returns.”

At 1006 BST, shares in Custodian Property Income REIT were flat at 72.4p.

Reporting by Josh White for Sharecast.com.