20 October 2015

Custodian REIT plc: NAV and highlights update

Custodian REIT, the UK commercial real estate investment company, today reports its unaudited net asset value (“NAV”) as at 30 September 2015 and highlights for the period from 1 July 2015 to 30 September 2015 (“the Period”).

Net asset value

The unaudited NAV of the Company at 30 September 2015 was £195.7 million, reflecting approximately 102.6 pence per share, an increase of 1.3% since 30 June 2015:

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 30 September 2015 and income for the quarter, but does not include any provision for the interim dividend for the quarter, to be paid in December 2015.

Activity during the Period has focused on pro-active asset management initiatives, directly accounting for £0.7m of the £2.4m valuation uplift. A total of £3.6 million was spent on two acquisitions during the Period, comprising an industrial unit at Glasgow Airport let to DHL and a modern builders’ merchant unit in Lincoln let to MKM Building Supplies. In addition, practical completion was achieved on the Portishead pre-let development funding of two retail warehouse units let to Majestic Wine and TJ Morris (t/a Home Bargains), and one leisure unit let to JD Wetherspoon, which saw a valuation uplift from completion.

In the forthcoming quarter, the Company intends to continue its asset management activities and complete on the current acquisition pipeline, with the aim of deploying debt facilities to increase gearing towards the target level of 25%.

At 30 September 2015 the committed pipeline consisted of £6.1 million of development fundings in Cannock and Stevenage, plus two acquisition opportunities in Birmingham and Torquay totalling £10.7 million.

Commenting on performance, Richard Shepherd-Cross, Managing Director of Custodian Capital Limited (the Company’s external fund manager), said:

“The valuation increase is in no small part due to the successful conclusion of various asset management strategies including rent reviews, new lettings, lease extensions and the retention of tenants beyond their contractual break clauses. The acquisitions during the Period maintain the quality of property and security of income demanded by our investment strategy.

“We have a strong pipeline including pre-let development funding projects which, once complete, will improve the portfolio’s weighted average unexpired lease term.

“Following the Period end we achieved practical completion of the development of a 27,400 sq ft industrial unit in Warwick, acquired the 39,800 sq ft Lancaster House office building in central Birmingham and completed a forward funding agreement for a pre-let development in Stevenage.”

For details of all properties in the portfolio please see www.custodianreit.com/property/portfolio.php.

Financing

Equity

The Company issued 9,800,000 new ordinary shares of 1p each in the capital of the Company (“the New Shares”) during the Period raising £10.6 million (before costs and expenses). The New Shares were issued at an average premium of 8.0% to the NAV per share at 30 June 2015, after adjusting the NAV to recognise the first quarter dividend of 1.5 pence per share paid to shareholders on the register at the close of business on 7 August 2015.

Debt

The Company operates a £25 million revolving credit facility with Lloyds Bank plc, which attracts interest of 2.45% above three month LIBOR and expires on 26 March 2019. The Company also operates a £20 million term loan with Lloyds Bank plc, which attracts interest of 1.95% above three month LIBOR and is repayable on 10 October 2019.

On 14 August 2015 the Company agreed and drew down a £20 million term loan with Scottish Widows plc, which attracts interest fixed at 3.935% and is repayable on 14 August 2025.

Dividends

An interim dividend of 1.5 pence per share for the quarter ended 30 June 2015 was paid on 30 September 2015. The Board expects to propose an interim dividend relating to the Period of 1.5 pence per share.

In the absence of unforeseen circumstances, the Board intends to pay further quarterly dividends to achieve the target dividend of 6.25 pence per share for the financial year ending 31 March 2016 and in subsequent financial years.

Sector and geographic analysis as at 30 September 2015

The Company continues to have a strong focus on industrial property, while retaining its investment objective to maintain a suitably balanced portfolio.

The Company operates a geographically diversified portfolio across the UK, seeking to ensure that no one area represents the majority of the portfolio.