Custodian REIT plc : Unaudited Net Asset Value as at 31 March 2020 and COVID-19 update
29 April 2020
Unaudited Net Asset Value as at
The Company's focus is on managing liquidity to mitigate the risks associated with COVID-19 disruption and maintaining a level of income for investors broadly linked to net rental receipts.
1 NAV per share movement including dividends paid and approved for the period.
2 Profit after tax excluding net gains on investment property divided by weighted average number of shares in issue.
3 Gross borrowings less cash (excluding rent deposits) divided by portfolio valuation.
4 Estimated rental value ("ERV") of let property divided by total portfolio ERV.
Net asset value
The unaudited NAV of the Company at 31 March 2020 was £426.7m, reflecting approximately 101.6p per share, a decrease of 2.8p (2.7%) since 31 December 2019:
5 Dividends of 1.6625p per share relating to the quarter ended
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 2020, which is subject to a 'material uncertainty' clause in line with RICS guidance, and income for the Period, but does not include any provision for the approved dividend of 1.6625p per share for the Period to be paid on 29 May 2020.
Commenting on the impact of COVID-19,
"The Period started with increased confidence in commercial property investment following the General Election and reduced uncertainty around Brexit. Sadly, all talk of confidence has now been eclipsed by the COVID-19 pandemic and the widespread impact on the economy in this country and globally.
"Our response has been to prioritise protecting cash flow and to secure the balance sheet. As a result the Company has withdrawn from two acquisitions of regional offices on which terms had been agreed. In addition, to address the impact of the statutory protections for commercial tenants introduced by the
"It is too early to assess the long-term impact of COVID-19 on the commercial property market but we believe it may accelerate pre-existing trends in the use of, and investment in, commercial property. We expect to see a further deterioration in secondary retail, an increase in demand for flexible office space (both traditional offices, fitted out and leased flexibly, as well as serviced offices) and a continuation of the growth of logistics and distribution. As always, we would expect location to be a key determinant of the future success of commercial property assets.
"In the near-term, of even more importance than the NAV derived from current valuations is the absolute focus on rent collection, future cash flow, ongoing asset management and the affordability of future dividends which are all underpinned by the Company's low ongoing charges ratio7 of 1.12% and low cost of debt of 3.0% (circa
6 Historical rental income received less certain property expenses divided by interest payable must be greater than 250%.
7 Expenses (excluding operating expenses of rental property recharged to tenants) divided by average quarterly NAV.
The Investment Manager directly manages the
The Company's rent invoicing profile comprises quarterly in advance (on both English and Scottish quarter days) and monthly in advance. Following negotiations regarding the March quarter rent, the Company has agreed that a number of tenants move from quarterly in advance to monthly in advance rent payments, or a deferral of the March quarter's rent with a full recovery over the next 12-18 months. Some tenants have yet to agree a payment profile but the Investment Manager remains in active discussion with these tenants to agree payment plans for the balance of outstanding rent.
Given the varied profile of the Company's rental invoicing, the Board believes reporting rent collected relating to the month of April best reflects the prevailing level of income generation from the Company's property portfolio. To date, 74% of rent contractually due relating to the month of April8 has been collected and 14% has been deferred by agreement (and is therefore no longer due in April) to be paid either monthly in arrears or to be recovered through a payment plan over the next 12-18 months.
8 Comprising payments received relating to
Despite the uncertainty caused by COVID-19, the Investment Manager has remained focused on active asset management including rent reviews, new lettings, lease extensions and the retention of tenants beyond their contractual break clauses during the Period, completing:
These positive asset management outcomes have been offset by
The portfolio's weighted average unexpired lease term to first break or expiry ("WAULT") decreased from 5.4 years at 31 December 2019 to 5.3 years at the Period end, reflecting the natural elapse of time largely offset by the successful asset management initiatives above.
The Company retains its strong financial position to address the extraordinary circumstances imposed by COVID-19, having:
The Company operates the following loan facilities:
Each facility has a discrete security pool, comprising a number of the Company's individual properties, over which the relevant lender has security and covenants:
The Company has
At a portfolio level, the aggregate interest cover on borrowings was more than 600% for the quarter ended
At 31 March 2020 the Company's property portfolio comprised 161 assets with a net initial yield9 ("NIY") of 6.8% (31
9 Passing rent divided by property valuation plus purchaser's costs.
10 Current passing rent plus ERV of vacant properties.
11 Includes car showrooms, petrol filling stations, children's day nurseries, restaurants, gymnasiums, hotels and healthcare units.
During the Period we have experienced a net decline in the portfolio valuation that broadly reflects the market trends in the differing sectors. Industrial and logistics values have marginally strengthened by 1.2%, office values have been broadly flat and we have seen a decline in retail values with a greater percentage decline in high street locations (8.2%) compared to out of town retail warehousing (5.1%). This is perhaps a reflection of the stock selection in the
The valuation is reported on the basis of 'material valuation uncertainty' as per the current RICS valuation standards. This does not invalidate the valuation but, in the current extraordinary circumstances, implies that less certainty can be attached to the valuation than otherwise would be the case. There is a body of market evidence to support the valuations in the usual way but, in addition, the valuers have reflected market sentiment in their reported numbers.
The Company operates a geographically diversified property portfolio across the
For details of all properties in the portfolio please see www.custodianreit.com/property-portfolio.
The Company issued 8.0m new ordinary shares of 1p each ("the New Shares") during the Period raising £9.1m. The New Shares were issued at a premium of 10.6% to the unaudited NAV per share at 31 December 2019, adjusted to exclude the dividend paid on 28 February 2020.
The Board intends to make the fourth quarterly interim dividend payment relating to the Period of 1.6625p per share on
However, as explained earlier, we are experiencing an inevitable disruption to cash collection in the current quarter, due to the COVID-19 pandemic, as a number of tenants seek to defer rental payments to protect their own cash flows. As a result, the current level of dividend is not expected to be fully supported by net rental receipts while the COVID-19 pandemic is impacting rent collections.
Acknowledging the importance of income for shareholders, the Company intends to pay the next two quarterly dividends at a minimum of 0.75p per share12, regardless of rent collection rates. Should rent collections in June and September quarters allow, more generous dividends may be possible. Over the course of the financial year, as deferred rents are collected, the Board hopes it will be possible to restore the dividend to a sustainable long-term level akin to previous years.
12 This is a target only and not a profit forecast. There can be no assurance that the target can or will be met and it should not be taken as an indication of the Company's expected or actual future results. Accordingly, shareholders or potential investors in the Company should not place any reliance on this target in deciding whether or not to invest in the Company or assume that the Company will make any distributions at all and should decide for themselves whether or not the target dividend yield is reasonable or achievable.
- Ends -
Further information regarding the Company can be found at the Company's website www.custodianreit.com or please contact:
Notes to Editors
The Company offers investors the opportunity to access a diversified portfolio of
|EQS News ID:||1032169|
|End of Announcement|
Quick facts: Custodian REIT
Market Cap: £365.45 m
NO INVESTMENT ADVICE
The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...FOR OUR FULL DISCLAIMER CLICK HERE