Custodian REIT has said it will increase its target dividend after reporting rent collection rates of 89% for the year to 31 March 2021.
The group paid a dividend of 4.5p in the year, which was down on the 6.65p it paid for the year to March 2020 reflecting the decreases in rent collection rate and rent roll since the onset of the COVID-19 pandemic.
It said it will target a dividend for the year to March 2022 of no less than 5.0p, based on rent collection levels remaining in line with expectations.
EPRA earnings per share for the year to March 2021 was 5.6p (2020: 7.0p), covering the dividend 125%.
The group released a net asset value (NAV) update for 31 March 2020 of 97.6p (31 Dec 2020: 96.4p), following a slight increase in the value of its portfolio to £551.9m (31 Dec 2020: £546.8m).
NAV total return for the year to March 2021 was 0.9% (2020: 1.1%), comprising 5.1% of income (2020: 6.2%) and a 4.2% capital decrease (2020: 5.1%)
The group has maintained a relatively low loan to value (LTV) ratio of 24.9%.
Richard Shepherd-Cross, fund manager, said: “In common with the wider economy the commercial property investment market has experienced a year unlike any other, with office workers deserting their offices, shoppers going online as retailers were obliged to close and pubs and restaurants unable to serve customers for a large part of the year. The government’s moratorium on the eviction of tenants for non-payment of rent has left landlords unable to compel tenants to pay rent, but despite these challenges, I believe real estate investment has been remarkably resilient.
“The clear winner in real estate investment has been the industrial and logistics sector which has benefited from the shift from the High Street to ‘E-tailing’ and from the onshoring of the national supply chain post Brexit. Investment demand and pricing are both at record levels which has been strongly positive for Custodian REIT as this sector makes up 49% of the portfolio, by value, and its valuation increased by 2.6% during the period.
“The high street retail sector’s future is uncertain, but, I believe as part of a combined retail and leisure-based city centre there will still be active demand from occupiers. Some of the crowds and queues witnessed, notably outside Primark, as non-essential retail re-opened, and outside pubs, were testament to the appeal of city centre locations. The trend for fewer shops was well established prior to the pandemic, but, in core locations we still expect to see high occupancy levels albeit at rental levels 25-50% below the peak. High Street retail makes up only 8% of the property portfolio by value and we have sold four small shops in the last six months, with another under offer, where we felt a return to rental growth in the medium term was unlikely.
“By contrast the out of town retail sector, which makes up 18% of the Custodian REIT property portfolio by value, is witnessing investors openly competing for assets. This is a sector where there is confidence that the combination of convenience, lower costs per square foot and the complementary offer to online retail will keep these assets relevant. Through the last year we have seen DIY and discounters (B&Q and B&M for example) trading strongly.
“It is widely believed that after a year of working from home the majority of workers are itching to get back to the office. Without doubt the way we use offices and how frequently we visit them has changed, following the largely successful national experiment of remote working. As always when considering real estate investment the location of offices will be key.”
CREI : Custodian REIT to up dividend