Custodian Property Income REIT said that it expects its share price to re-rate back towards NAV, after the company delivered strong earnings growth over the year to 31 March 2025.
In annual results, the company posted a 4.9% uplift in EPRA earnings to 6.1p per share, fully covering its dividend of 6.0p (which was up 3.5% on the prior year).
Like-for-like valuation of the company’s portfolio of 151 properties increased by 2.2% to £594.4m supporting a 2.9% NAV increase and contributing to a 9.5% NAV total return.
Valuations have improved at an accelerating rate, quarter-on-quarter, as decreasing interest rates and real estate market sentiment started to be reflected, the company said.
Chair David MacLellan said: “As short-term interest rates fall and investors reconnect with real estate investment for its attractive income credentials, the company’s share price is well-placed to re-rate back towards NAV and enhance total returns. In addition, with asset prices showing signs of recovery and following the recent announcement of an all-share portfolio acquisition, the board looks to the future with confidence.”
Post year end, the company completed the purchase of a £22.1m portfolio via the all-share acquisition of a family property company. The ‘Merlin’ acquisition comprises a portfolio of 28 smaller lot-size regional UK investment properties which are highly complementary to the company’s existing assets.
During the year the company completed 15 rent reviews at an average 29% uplift to previous passing rent, with 64 new lettings, lease renewals and lease regears completed. This contributed to a 2.3% growth in like-for-like contractual rent to £43.9m.
Estimated rental value (ERV) grew 2.4%, with ERV now 14% ahead of passing rent, providing a significant opportunity to unlock further rental growth through asset management and at lease events.
The company invested £8.2m into the refurbishment of offices in Leeds and Manchester and industrial units in Livingston, Plymouth and Aberdeen, and solar panel installations, while disposing of £15.1m of assets in the year at an aggregate 38% premium to the pre-offer valuation. A further £6.9m of disposals have completed since year end at an aggregate 12% premium to pre-offer valuation.
Net gearing remains low at 27.9% (2024: 29.2%) with 80% at a fixed rate of interest. Since the year end the company’s RCF limit has been increased from £50m to £60m to maintain headroom following expected repayment of a £20m loan expiring in August 2025.
Commenting on the final results, Richard Shepherd-Cross, managing director of the investment manager, said: “The company has delivered another strong year of operational performance. Our strategy of investing in smaller lot sized properties leased to institutional quality and household name occupiers has again led to our diversified portfolio delivering the income growth it is designed to achieve. Against challenging market conditions, we have delivered an average 29% rental increase at review, helping drive growth in like-for-like rent of 2.3%. This has led to a 4.9% increase in earnings per share and underpinned our fully covered dividend which offered an attractive yield of 7.9% at 31 March 2025. With the portfolio’s estimated rental value 14% ahead of its current passing rent, there remains a clear opportunity to continue to grow income.
“Throughout the year we continued to make disposals, achieving an average 5% premium to the most recent valuation and 38% ahead of the assets’ pre-offer valuation, which both supports the portfolio valuation and allows us to continue to recycle capital and increase NAV.”
MacLellan added: “Custodian Property Income REIT remains one of only a few active and genuinely diversified property investment companies, and the Company’s differentiated property strategy positions it well to continue to deliver for long-term investors seeking an income focused opportunity.
“We have continued to look for ways to grow the portfolio in an environment where raising capital via the stock exchange remains challenging and last week were pleased to announce the acquisition of a meaningful commercial property portfolio that is highly complementary to our own, both in terms of geographical spread and sector diversity. The share based and net asset value (“NAV”)-for-NAV nature of this transaction allowed the vendor to resolve a succession issue and a potentially significant capital gains tax liability and, we believe, has provided a blueprint for other high net worth and family offices to follow, while helping the Company achieve its ambitions for growth.”
