COVID cuts Custodian’s NAV – Custodian REIT has reported a drop in its NAV to 95.7p from 101.6p over the second quarter of 2020, related to COVID-19. The NAV total return for the period was -4.9%. The valuation yield on the property portfolio rose to 7% from 6.8%. However, 92% of rents were collected (after adjusting for deferrals – in cash the figure was 80%).
Based on this level of rent collection, the board has approved a 0.95p dividend for the quarter. Custodian’s Q1 dividend was 1.6625p but, given the ongoing crisis, the company had previously indicated a minimum dividend of 0.75p for Q2 and they are pleased that they have been able to exceed this.
Valuations appear to have dropped across all regions and sectors with Custodian’s high street retail hit hardest – down 7.5%, closely followed by a basket of properties consisting of car showrooms, petrol filling stations, children’s day nurseries, restaurants, gymnasiums, hotels and healthcare units, which fell by 6.8%. Most resilient was industrial – which fell by 2.2%.
Occupancy has fallen from 95.6% to 93.8%. The company published a table of ongoing problems with some of its tenants which we reproduce here.
The statement says “In nearly all these affected properties the businesses remain in occupation and continue to trade, with negotiations for new lease terms either agreed and in solicitors hands or under negotiation. Offers from new occupiers have been secured on two of the properties demonstrating occupier demand remains in the market for well-located assets.”
Finances
Custodian has £22m of cash-in-hand with gross borrowings of £150m – equivalent to net gearing of 23.5% on a loan-to-value basis, compared to a maximum covenant of 35%. Its borrowings come in four facilities, provided by Lloyds, Scottish Widows and Aviva. Each of these has its own covenants. The statement says that collectively the portfolio has ample headroom on its covenants – it could be that an individual facility is more stretched, however. £173.5m of properties are unencumbered by debt – some of these could be added as security to a facility to repair its covenant if needs be. Also, the company has put in place pre-emptive interest cover covenant waivers until at least the end of September 2020.