Annual Report: For the year ended 31 March 2021

Annual Report and Accounts 2021

2021AccountsandrtRepo Annual CustodianREITplc

Welcome to the Custodian REIT plc Annual Report and Accounts 2021

Sheffield, Foundry House

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Custodian REIT plc ("Custodian REIT" or "the Company1") is a UK real estate investment trust ("REIT") with a portfolio comprising properties predominantly let to institutional grade tenants throughout the UK, principally characterised by properties with individual values of less than £10m at acquisition.

Contents

Strategic	Financial highlights and
							performance summary	2
Report	Business model and strategy	4
Chairman's statement	6
Investment Manager's report	10
							Asset management report	14
							ESG Committee report	20
							Financial review	26
							Property portfolio	30
							Principal risks and uncertainties	70
							Section 172 statement
							and stakeholder relationships	74
Governance	Board of Directors and
							Key Investment Manager personnel	80
							Governance report	84
							Audit and Risk Committee report	88
							Management Engagement
							Committee report	91
							Nominations Committee report	92
							Remuneration Committee report	94
							Directors' report	97
							Directors' responsibilities statement	103
Financial	Independent auditor's report	104
							Consolidated statement
Statements	of comprehensive income	112
statements of financial position	113
							Consolidated and Company
							Consolidated and Company
							statements of cash flows	114
							Consolidated and Company
							statements of changes in equity	115
							Notes to the financial statements	116
							Environmental disclosures (unaudited)	135
							Historical performance
							summary audit (unaudited)	147
For more information, visit:	Financial calendar	147
custodianreit.com	Company information	148

2021 Accounts and Report Annual plc REIT Custodian

1. References to the Company in the Strategic report include the Company and its non-trading subsidiaries: Custodian Real Estate Limited, Custodian Real Estate (JMP4) Limited, Custodian Real Estate BL Limited, Custodian Real Estate (Beaumont Leys) Limited and Custodian Real Estate (Leicester) Limited.

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CustodianREITplc

Financial highlights and performance summary

2021AccountsandrtRepo Annual

Rent collected for the year

91%

91% of rent collected for the year, adjusted for contractual rent deferrals

EPRA2 earnings per share3

5.6p

2021 5.6p

2020 7.0p

EPRA2 earnings per share3 decreased to 5.6p (2020: 7.0p) due to providing for deferred and overdue rent and a 5.0% decrease in the annual rent roll

Basic and diluted earnings per share4

0.9p

2021 0.9p

2020 0.5p

Basic and diluted earnings per share4 of 0.9p (2020: 0.5p), impacted by property valuation decreases of £19.6m (2020: £25.9m)

Profit before tax	Aggregate dividends per share
£3.7m	5.0p
2021	£3.7m	2021	5.0p
2020	£2.1m	2020	6.65p
Profit before tax up 76.6%	Aggregate dividends per share for the year
		of 5.0p (2020: 6.65p), reflecting the decreases
		in rent collection rate and rent roll since the onset
		of the COVID-19 pandemic

Target dividend per share

5.0p

2022 Minimum 5.0p

2021 5.0p

2020 6.65p

Target dividend per share for the year ending 31 March 2022 of not less than 5.0p (2021: 5.0p), based on rent collection levels remaining in line with expectations

NAV total return per share5

0.9p

2021 0.9%

2020 1.1%

NAV total return per share5 of 0.9% (2020: 1.1%)

comprising 4.8% dividends (2020: 6.2%) and

a 3.9% capital decrease (2020: 5.1% capital decrease)

1. The European Public Real Estate Association ("EPRA").
2. Profit after tax excluding net gains or losses on investment property divided by weighted average number of shares in issue.
3. Profit after tax divided by weighted average number of shares in issue.

Property value

£551.9m

2021 £551.9m

2020 £559.8m

• £19.6m aggregate valuation decrease
  (3.5% of property portfolio value) comprising a £9.4m property valuation uplift from successful asset management initiatives and £29m of general valuation decreases, primarily due to decreases in the estimated rental value ("ERV") of high street retail properties, negative market sentiment for retail assets and the impact of the COVID-19 pandemic

1. Net asset value ("NAV") movement including dividends paid during the year on shares in issue at 31 March 2020.
2. Before acquisition costs of £0.7m.
3. Before disposal costs of £0.1m.

• £11.4m6 invested in three property acquisitions
• Disposal of five properties for aggregate consideration of £4.4m7
• £2.3m capital expenditure incurred including £0.7m on construction of a drive-through restaurant on an existing site

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Strategic Report / Governance / Financial Statements

Share price total return8		Dividend cover 9	Dividends per share 10(p)
											2021
2021	2.3%			2021		112.7%				5.0
2020					2020						2020
5.0%					104.4%				6.65
NAV and EPRA NTA11 (£m)		NAV per share and NTA per share11 (p)	Share price (p)
2021				2021						2021
409.9				97.6				91.8
2020	426.7				2020		101.6				2020	99.0
Market capitalisation (£m)		DiscountofsharepricetoNAVpershare	Net gearing12
2021				2021						2021
385.6				(5.9%)				24.9%
2020	415.9				2020		(2.6%)				2020	22.4%
Ongoing charges ratio13 ("OCR")		OCR excluding direct property	Weighted average energy
					expenses14	performance certificate
											("EPC") rating15
2021				2021
2.48%				1.12%				2021	(C) 63
2020				2020						2020
1.55%				1.12%				(C) 70

Alternative performance measures

The Company reports alternative performance measures ("APMs") to assist stakeholders in assessing performance alongside the Company's results on a statutory basis, set out above. APMs are among the key performance indicators used by the Board to assess the Company's performance and are used by research analysts covering the Company. Certain other APMs may not be directly comparable with other companies' adjusted measures, and APMs are not intended to be a substitute for, or superior to, any IFRS measures of performance. Supporting calculations for APMs and reconciliations between APMs and their IFRS equivalents are set out in Note 21.

8.	Share price movement including dividends paid during the year.	12.	Gross borrowings less cash (excluding rent deposits)
9..	Profit after tax, excluding net gains or losses on investment		divided by property portfolio value.
	property, divided by dividends paid and approved for the year.	13.	Expenses (excluding operating expenses of rental property
10.	Dividends paid and approved for the year.		recharged to tenants) divided by average quarterly NAV.
11.	Following the recent update to EPRA's Best Practice	14.	Expenses (excluding operating expenses of rental property)
	Recommendations Guidelines the Company's peer group		divided by average quarterly NAV.
	has adopted EPRA net tangible assets ("NTA") as the primary	15.	For properties in Scotland, English equivalent EPC ratings have
	measure of net asset value.There are no differences between		been obtained.
	the Company's IFRS NAV, EPRA NAV and EPRA NTA.

2021 Accounts and Report Annual plc REIT Custodian

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