Custodian REIT plc : Unaudited Net Asset Value as at 30 June 2019

30 July 2019

Custodian REIT plc

('Custodian REIT'or 'the Company')

Unaudited Net Asset Value as at 30 June 2019

Custodian REIT (LSE: CREI), the UK commercial real estate investmentcompany, today reports its unaudited net asset value ('NAV') as at 30 June 2019and highlights for the period from 1 April 2019 to 30 June 2019 ('the Period').

Financial highlights

• NAV total return per share1for the Period of 0.5%
• Dividend per share approved for the Period of 1.6625p
• NAV per share of 106.0p (31 March 2019: 107.1p)
• NAV of £432.7m(31 March2019: £426.6m)
• Net gearing2 of 22.8%loan-to-value (31 March 2019: 24.1%)
• £11.7m3of new equity raised during the Period at an average premium of 11.3%to dividend adjusted NAV per share
• Market capitalisation of £484.1m (31 March 2019: £442.8m)

Portfolio highlights

• Portfolio value of £568.0m(31 March 2019: £572.7m)
• £0.8m valuation increase from successful asset management initiatives
• £6.0m overall valuation decrease (1.0% of portfolio)
• EPRA occupancy4 95.9%(31 March 2019: 95.9%)

1 NAV per share movement includingdividends paid and approvedfor the Period.

2 Gross borrowings less unrestricted cash divided by portfolio valuation.

3 Before costs and expenses of £0.1m.

4 Estimated rental value ('ERV') of let property divided by total portfolio ERV.

Net asset value

The unaudited NAV of the Company at 30 June2019 was £432.7m, reflecting approximately 106.0pper share, a decrease of 1.1p (1.0%)since 31 March 2019:

	Penceper share	£m
NAV at 31 March2019	107.1	426.6
Issue of equity (net of costs)	0.2	11.6
Valuation movements relating to:
- Asset management activity	0.2	0.8
- Other valuation movements	(1.7)	(6.8)
Net valuation movement	(1.5)	(6.0)
Income earned for the Period5	2.7	10.8
Expenses and net finance costs for the Period5	(0.9)	(3.8)
Dividends paid6	(1.6)	(6.5)
NAV at 30 June2019	106.0	432.7

5 Including £0.9mof annual insurance premium recharged to tenants.

6 Dividends of 1.6375p per share were paid on shares in issue throughout the Period.

The NAV attributable to the ordinary shares of the Company is calculated under International Financial Reporting Standards and incorporates the independentportfolio valuation as at 30 June2019 of £568.0m (31 March 2019: £572.7m) and income for the Periodbutdoes not include anyprovision for the approved dividend of 1.6625p per share for the Period tobe paid on 30 August 2019.

Property market

Commenting on the regional commercial property market, Richard Shepherd-Cross said:

'Demand continues for UK commercial property and the attractive income returns on offer. However,demand is polarisedbetween perceivedlow risk and perceived higher risk assets.

'Those assets which the market perceives to be lower risk include mostindustrial properties and properties let on longerleases, particularly those with RPI/CPI indexed rent reviews. Valuations reflect this sentiment and Custodian REIT has experienced further valuation gains across its industrial portfolio, particularly where unexpired lease terms are longer. The excess of demand over supply forlongerlet and industrial assetsis adding to upward pressureon pricing, with very few sellers and a long list of buyers. There appears to be no immediate prospect of significant market movements, particularly amongst smaller, regional assets where rental levels remain affordable and the development pipeline is limited. Looking further ahead, the increase in supply of speculative 'big box' logistics units could start to limit rental growth which in turn could undermine some of the keenest prices being paid in the market.

'The retail sectoris considered higher risk, borne out by the recent wave of Company Voluntary Arrangements('CVAs') that have swept the retail sector. To date retailers appear to have succeeded in persuadinglandlordsto approvemost CVAs. Recently there has been moreresistance from landlords but I expectwe will see further CVAs before concerted landlord actionor legislation restrictsthe practice. In core retail locations, the risk of CVA is not one of vacancy, but of falling rents. It has been our experience that retailers want to continue trading from their stores post CVA but at lower rents and the widespread impact of CVA rents is hastening a fall in retail rental values. We expect further falls in capital values in this sector. One of the impacts of recent CVAs is to precipitate more widespread retail rent reductions. However, lower rentsare likely to support occupancy levels as stores remain affordable. The desire to continue to trade from stores appears to be supported by recent analysis of retailers'sales,which strongly supportsretailers retainingphysical stores as part of a multi-channel sales offering. The research shows that where retailers have a physical store, they are likely to see higher levels of online sales through a higher profile, click and collect or the ability of shoppers to make returns more conveniently.

'We expect our out of town, retail warehouse portfolio to be more resilient to rental decline than on high street properties for three reasons: Firstly,we expect that well-located units, let off low rents which are complimentary to a retailer's onlineofferingwill continue to be in demand. Secondly, as the passing rents are currently much lower across our retail warehouse portfolio than on the high street, we expect less impact from retailers trying to reduce the costs of their physical stores; and finally,the supply of well-located, out of town stores is more limitedthan high street units, where there is an acknowledged oversupply.

'Regional offices have provided fairly stable returns over the period. Sustained demand coupled with low levels of development and restricted supply of Grade A offices in regional markets has led to rental growth,which has percolated through wider markets. While the costs of office ownership by way of landlord's capital expenditure and tenant lease incentives remains higher for offices than other sectors, we expect to see a relatively steady market ahead.

'Custodian REIT benefits from a balanced and diverse portfolio with 17% of income derived from 'alternative' assets, which are broadlyshowing resilience despite the challenges in retail markets. Current market conditions make a strong case for maintaining our diverse portfolio, where the largest tenant is responsible for only 3.4% of the rent roll, across three properties in different locations and no more than 1.7% of rent due is from any single-letproperty.

'Custodian REIT's diversified portfolio is mitigating some of the challenges in retail and the continued asset management of the portfolio is supporting net asset value.'

Asset management

A continued focus on active asset management including rent reviews, new lettings, lease extensions and the retention of tenants beyond their contractual break clauses resulted in a £0.8mvaluation increase in the Period, primarily due to agreeinga five year extension to a lease with Turpin Distribution at an industrial unit in Biggleswade, increasing annual rent by 10% to £330k and valuation by £0.4m.

Further initiatives on other properties currently under review are expected to complete during the coming months.

The portfolio's weighted average unexpired lease term to first break or expiry ('WAULT')was maintained at 5.6 years with the impact of lease re-gears and new lettings offsetting the natural elapse of a quarter of a year due to the passage of time.

Portfolio analysis

At 30 June2019the Company's property portfolio comprised 155assets (31 March2019: 155 assets) with a net initial yield7 ('NIY') of 6.7%(31 March2019: 6.6%). The portfolio is split between the main commercial property sectors, in line with the Company'sobjective to maintain a suitably balanced investment portfolio. Slight swings in sector weightings reflect market pricing at any given time and the desire to maintain an opportunistic approach to acquisitions. Sector weightings are shown below:

7Passing rent divided by property valuation plus purchaser's costs.

Sector	Valuation 30 Jun2019 £m	Weighting by value 30 Jun 2019	Period valuation movement £m	Weighting by income830 Jun2019	Weighting by income8 31 Mar 2019
Industrial	227.4	40%	2.0	38%	38%
Retail warehouse	122.4	21%	(2.4)	22%	22%
Other9	94.0	17%	(1.1)	17%	17%
High street retail	64.1	11%	(4.0)	12%	12%
Office	60.1	11%	(0.5)	11%	11%
Total	568.0	100%	(6.0)	100%	100%

8Current passing rent plus ERV of vacant properties.

9 Includes car showrooms, petrol filling stations, children's day nurseries, restaurants, gymnasiums, hotels and healthcareunits.

The valuation decreaseof £6.0m was primarily driven by high street retail valuations falling by £4.0m, due to a marked reduction in ERVs across the portfolio and the CVAs of Paperchase and Cotswold Outdoors which, in an aggregate, resulted in a £140k reduction in annual contractual rent at the Company's assets in Shrewsbury

Despite a £2.4m decrease in the valuation of retail warehouse assets during the Period, we believelow rents per sq ft, 'big box' formats, free parkingand a complementary relationship with online through continued growth in 'click-and-collect' mean valuations and rents are likely to remainmore robust than in the High Street.

Diversification across sectors helps to remove volatility from the portfolio as demonstrated bythe Industrial sector of the portfolio seeing a £2.0mvaluation increase duringthe Period.

The Company operates a geographically diversified portfolio acrossthe UK seeking to ensure that no one regionrepresents an overweight position withinthe portfolio. The geographic analysis of the Company's portfolio at 30 June2019was as follows:

Location	Valuation 30 Jun2019 £m	Weighting by value 30 Jun 2019	Period valuation movement £m	Weighting by income10 30 Jun 2019	Weighting by income10 31 Mar 2019
West Midlands	130.2	23%	(3.1)	21%	22%
North-West	91.2	16%	(0.5)	18%	18%
South-East	75.6	13%	(1.6)	13%	12%
South-West	70.4	12%	(0.9)	11%	11%
East Midlands	69.7	12%	(0.8)	13%	13%
North-East	51.5	10%	0.2	10%	10%
Scotland	46.0	8%	1.1	8%	8%
Eastern	27.3	5%	(0.2)	5%	5%
Wales	6.1	1%	(0.2)	1%	1%
Total	568.0	100%	(6.0)	100%	100%

10 Current passing rent plus ERVof vacant properties.

For details of all properties in the portfolio please seewww.custodianreit.com/property-portfolio.

Activityand pipeline

Commenting on pipeline, Richard Shepherd-Cross said:

'We are considering a pipeline of opportunities and have terms agreed on a drive-through coffee shop.'

Financing

Equity

The Company issued 10.0m newordinary shares of 1p each ('the New Shares') during the Period raising gross proceeds of £11.7m. The New Shares were issued at an averagepremium of 11.3%to theunaudited NAV per share at 31 March2019, adjusted to exclude the dividend paid on 31 May2019.

Debt

At the Period end the Company had:

• A£35m revolving credit facility ('RCF') with Lloyds Bank plcwithinterestof 2.45% above three-month LIBOR expiringon 13 November 2020;
• A£20mterm loan with Scottish Widows plcwith interest fixed at 3.935% and is repayable on 13 August 2025;
• A £45mterm loan with Scottish Widows plc withinterest fixed at 2.987% and is repayable on 5 June 2028; and

• A £50m term loan with Aviva Investors Real Estate Financecomprising:
  1. A£35m tranche repayable on 6April 2032with fixed annual interest of 3.02%; and
  2. A £15m tranche repayable on 3 November 2032 with fixed annual interest of 3.26%.

The Board expects the RCF facility to be permanently increased to £45m later this year.

Dividends

An interim dividend of 1.6375pper share for the quarter ended 31 March 2019was paid on 31 May 2019. The Board has approvedan interim dividend relating to the Period of 1.6625pper share payable on 30 August 2019to shareholders on the register on 26 July2019.

In the absence of unforeseen circumstances, the Board intends to pay quarterly dividendsto achieve a target dividend11 per share for the year ending 31 March 2020 of 6.65p (2019: 6.55p). The Board's objective is to grow the dividend on a sustainable basis, at a rate which is fully covered by projected net rental income and does not inhibit the flexibility of the Company's investment strategy.

11 This is a target only and not a profit forecast. There can be no assurance that the target can or will be met and it should not be taken as an indication of the Company's expected or actual future results. Accordingly, shareholders or potential investors in the Company should not place any reliance on this target in deciding whether or not to invest in the Company or assume that the Company will make any distributions at all and should decide for themselves whether or not the target dividend yield is reasonable or achievable.

- Ends -

Further information:

Further information regarding the Company can be found at the Company's websitewww.custodianreit.com or please contact:

Custodian Capital Limited
Richard Shepherd-Cross / Nathan Imlach/ Ian Mattioli MBE	Tel: [phone]
	www.custodiancapital.com

Numis Securities Limited
Hugh Jonathan / Nathan Brown	Tel: [phone]
	www.numis.com/funds

Camarco
Ed Gascoigne-Pees	Tel: [phone]
	www.camarco.co.uk

Notes to Editors

Custodian REIT plc is a UK real estate investment trust, which listed on the main market of the London Stock Exchange on 26 March 2014. Its portfolio comprises properties predominantly let to institutional grade tenants on long leases throughout the UK and is principally characterised by propertieswith individual values of less than £10m at acquisition.

The Company offers investors the opportunity to access a diversified portfolio of UK commercial real estate through a closed-ended fund. By targeting sub £10mlot-size, regionalproperties, the Company intends to provide investors with an attractive level of income with the potential for capital growth.

Custodian Capital Limited is the discretionary investment manager of the Company.

For more information visitwww.custodianreit.comandwww.custodiancapital.com.