CUSTODIAN PROPERTY INCOME REIT PLC The Company paid a fourth interim dividend relating to the quarter ended 31 March 2021 of 1.25p per ordinary share (totalling GBP5.3m) on 28 May 2021 to shareholders on the register at the close of business on 14 May 2021. The Company has approved a fifth interim dividend per share relating to the year of 0.5p totalling GBP2.1m payable on 30 June 2021 to shareholders on the register at the close of business on 21 May 2021. These dividends have not been included as liabilities in these financial statements. 10. Investment property
Group and Company GBP000 At 31 March 2019 572,745 Impact of lease incentives 1,402 Additions 24,647 Amortisation of right-of-use asset (7) Capital expenditure and development 2,804 Disposals (15,325) Valuation decrease before acquisition costs (25,850) Acquisition costs (599) Valuation decrease including acquisition costs (26,449) At 31 March 2020 559,817 Impact of lease incentives 1,932 Additions 12,150 Amortisation of right-of-use asset (7) Capital expenditure and development 2,308 Disposals (3,960) Valuation decrease before acquisition costs (19,611) Acquisition costs (707) Valuation decrease including acquisition costs (20,318) At 31 March 2021 551,922
GBP391.9m (2020: GBP375.1m) of investment property has been charged as security against the Company's borrowings. GBP0.6m (2020: GBP0.6m) of investment property comprises right-of-use assets.
The carrying value of investment property at 31 March 2021 comprises GBP444.1m freehold (2020: GBP447.9m) and GBP107.8m leasehold property (2020: GBP111.9m).
Investment property is stated at the Directors' estimate of its 31 March 2021 fair value. Lambert Smith Hampton Group Limited and Knight Frank LLP, professionally qualified independent valuers, each valued approximately half of the property portfolio as at 31 March 2021 in accordance with the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors ("RICS"). LSH and KF have recent experience in the relevant locations and categories of the property being valued. 31 March 2020 valuations were subject to a 'material uncertainty' clause in line with RICS guidance.
Investment property has been valued using the investment method which involves applying a yield to rental income streams. Inputs include yield, current rent and ERV. For the year end valuation, the equivalent yields used ranged from 4.3% to 12.3%. Valuation reports are based on both information provided by the Company e.g. current rents and lease terms, which are derived from the Company's financial and property management systems and are subject to the Company's overall control environment, and assumptions applied by the valuers e.g. ERVs and yields. These assumptions are based on market observation and the valuers' professional judgement. In estimating the fair value of each property, the highest and best use of the properties is their current use. In response to the COVID-19 pandemic, for all assets occupied by tenants currently not trading or with trade significantly curtailed at the year end, the Company's valuers assumed a three-month rental void and applied a yield increase of 25-75bps to valuations. It is not possible to estimate sensitivity to these assumptions.
All other factors being equal, a higher equivalent yield would lead to a decrease in the valuation of investment property, and an increase in the current or estimated future rental stream would have the effect of increasing capital value, and vice versa. However, there are interrelationships between unobservable inputs which are partially determined by market conditions, which could impact on these changes. 11. Investments
Shares in subsidiaries
Company
31 31
Country of Principal Ordinary March March
registration and activity shares held 2021 2020
Company incorporation
number GBP000 GBP000
Name
Custodian Real Estate Limited 08882372 England and Wales Non-trading 100% - -
Custodian Real Estate BL Limited Non-trading -
09270501 England and Wales in liquidation 100% - -
Custodian Real Estate (Beaumont Leys)
Limited* 04364589 England and Wales Non-trading - 100% 4 4
in liquidation
Custodian Real Estate (Leicester) Limited* Non-trading -
04312180 England and Wales in liquidation 100% 497 497
Custodian Real Estate (JMP4) Limited 11187952 England and Wales Non-trading - 100% 2,904 2,904
(formerly John Menzies Property 4 Limited) in liquidation
3,405 3,405 * Held indirectly
The Company's non-trading UK subsidiaries have claimed the audit exemption available under Section 479A of the Companies Act 2006. The Company's registered office is also the registered office of each UK subsidiary.
Non-listed equity investments
Group and
Company
31 March 31 March
Country of registration and Principal Ordinary shares 2021 2020
incorporation activity held
Company GBP000 GBP000
number
Name
AGO Hotels 12747566 England and Wales Operator of 4.5% - -
Limited hotels
- - The Company was allotted 4.5% of the ordinary share capital of AGO Hotels Limited on 31 January 2021 as part of a new letting of its hotel asset in Portishead. 12. Trade and other receivables
31 March 31 March
2021 2020
Group and Company GBP000 GBP000
Falling due in less than one year:
Trade receivables 4,192 4,359
Other receivables 1,706 217
Prepayments and accrued income 103 721
6,001 5,297 The Company regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increases in credit risk before amounts become past due.
The Company considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable: ? When there is a breach of financial covenants by the debtor; or ? Available information indicates the debtor is unlikely to pay its creditors.
Such balances are provided for in full. For remaining balances the Company has applied an expected credit loss ("ECL") matrix based on its experience of collecting rent arrears and deferred rents since the onset of COVID-19 disruption. The ECL matrix fully provides for receivable balances more than 90 days past due, partially provides against receivable balances between one and 90 days past due and partially provides against receivable balances not yet due because of a contractual deferral.
The movement in the expected credit loss provision, set out below, is recognised within directly incurred operating expenses of rental property of GBP5,559k (2020: GBP1,883k) in the income statement.
31 March 31 March
2021 2020
Group and Company GBP000 GBP000
Expected credit loss provision
Opening balance 341 18
Increase in provision relating to trade receivables that are credit-impaired 2,689 323
Closing balance 3,030 341 The increase in provision during the year is due to tenant's not settling their contractual rental obligations on a timely basis, primarily due to a cessation or curtailment of trade due to the COVID-19 pandemic.
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