Custodian REIT : reports annual results for the year ended 31 March 2021

16 June 2021

Custodian REIT plc

("Custodian REIT" or "the Company")

Final Results

Custodian REIT (LSE: CREI), the UK commercial real estate investment company, today reports its final results for the year ended 31 March 2021.

Financial highlights and performance summary

• 91% of rent collected for the year, adjusted for contractual rent deferrals
• EPRA1 earnings per share2 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 share3 of 0.9p (2020: 0.5p), impacted by property valuation
  decreases of £19.6m (2020: £25.9m)
• Profit before tax up 76.6% to £3.7m (2020: £2.1m)
• 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 for the year ending 31 March 2022 of not less than 5.0p, based on rent collection levels remaining in line with expectations
• NAV total return per share4 of 0.9% (2020: 1.1%) comprising 4.8% dividends (2020: 6.2%) and a
  3.9% capital decrease (2020: 5.1% capital decrease)
• Property value of £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 £29.0m 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
  • £11.4m5 invested in three property acquisitions

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.

1. Profit after tax divided by weighted average number of shares in issue.
2. Net Asset Value ("NAV") movement including dividends paid during the year on shares in issue at 31 March 2020.
3. Before acquisition costs of £0.7m.

1

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

	2021	2020	Change
Return
Share price total return7	(2.3%)	(5.0%)	2.7%
Dividend cover8	112.7%	104.4%	8.3%
Dividends per share9 (p)	5.0	6.65	(24.8%)
Capital values
NAV and EPRA NTA10 (£m)	409.9	426.7	(3.9%)
NAV per share and NTA per share (p)	97.6	101.6	(3.9%)
Share price (p)	91.8	99.0	(7.3%)
Market capitalisation (£m)	385.6	415.9	(7.3%)
Discount of share price to NAV per share	(5.9%)	(2.6%)	(3.3%)
Net gearing11	24.9%	22.4%	(2.5%)
Costs
Ongoing charges ratio12 ("OCR")	2.48%	1.55%	0.93%
OCR excluding direct property expenses13	1.12%	1.12%	0.0%
Environmental
Weighted average energy performance certificate	C (63)	C (70)	(10%)
("EPC") rating14

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.

6 Before disposal costs of £0.1m.

7 Share price movement including dividends paid during the year.

8 Profit after tax, excluding net gains or losses on investment property, divided by dividends paid and approved for the year.

9 Dividends paid and approved for the year.

10 Following the recent update to EPRA's Best Practice Recommendations Guidelines the Company's peer group has adopted EPRA net tangible assets ("NTA") as the primary measure of net asset value. There are no differences between the Company's IFRS NAV, EPRA NAV and EPRA NTA.

11 Gross borrowings less cash (excluding rent deposits) divided by property portfolio value.

12 Expenses (excluding operating expenses of rental property recharged to tenants) divided by average quarterly NAV.

13 Expenses (excluding operating expenses of rental property) divided by average quarterly NAV.

14 For properties in Scotland, English equivalent EPC ratings have been obtained.

Commenting on the final results, David Hunter, Chairman of Custodian REIT, said:

"Custodian REIT's investment strategy has been tested, with the Company operating for a full year under the shadow of COVID-19. From a low point in May 2020, Custodian REIT's share price has been gently recovering, matching the greater clarity that the Company has provided around dividends through the course of the year.

"The impact of the pandemic has been to accelerate the decline in high street retail, pushing an increasing number of occupiers into insolvency and many occupiers into seeking to defer rental payments. Despite the strongly positive performance of the Company's industrial and logistics portfolio, the net result has been a 3.5% property valuation decrease during the year.

"However, 91% of rent was collected, net of contractual deferrals, meaning I was delighted to be able to announce dividends per share totalling 5.0p for the year and that the Company is targeting a dividend per share of at least 5.0p for the year ending 31 March 2022, based on rent collection levels remaining in line with expectations. This dividend outcome is significantly ahead of the minimum level announced in April 2020 of 0.75p per quarter before the full impact of the first national lockdown could be ascertained.

"The combination of resilient capital values and a return to stabilised dividends should lend support to Custodian REIT's objective to be the REIT of choice for private and institutional investors seeking high and well supported dividends from diversified UK commercial property."

Further information

Further information regarding the Company can be found at the Company's website www.custodianreit.comor please contact:

Custodian Capital Limited
Richard Shepherd-Cross / Ed Moore / Ian Mattioli MBE	Tel: [phone]
	www.custodiancapital.com
Numis Securities Limited
Hugh Jonathan / Nathan Brown	Tel: [phone]
	www.numiscorp.com
Camarco
Hazel Stevenson/ Emily Hall	Tel: [phone]
	www.camarco.co.uk

Analyst presentation

There will be an analyst presentation to discuss the results at 2:00pm today. Those analysts wishing to take part are asked to register at:

numiscorp.zoom.us/webinar/register/WN_cZmwSfrpTAqdmcWrYM4pmQ

After registering, you will receive a confirmation email containing information about joining the webinar. If you have any questions please contact Amy Rush on [phone] or at [e-mail].

Investor presentation

The Board has been monitoring whether COVID-19 guidance limiting public gatherings and travel will be in place when the Company holds its AGM on 25 August 2021. To provide certainty and encourage interaction and engagement with our shareholders, the Company has arranged an online investor presentation at 2:00pm on 6 July 2021 at which shareholders will receive updates from the Chairman and Investment Manager with the opportunity for an interactive question and answer session.

Those investors wishing to take part are asked to register at:

bigmarker.com/mattioli-woods-plc/Custodian-REIT-plc-annual-results

Business model and strategy

Purpose

Custodian REIT offers investors the opportunity to access a diversified portfolio of UK commercial real estate through a closed-ended fund. The Company seeks to provide investors with an attractive level of income and the potential for capital growth, becoming the REIT of choice for private and institutional investors seeking high and stable dividends from well-diversified UK real estate.

Investment Policy

The Company's investment policy15 is summarised below:

• To invest in a diverse portfolio of UK commercial real estate, principally characterised by individual property values of less than £10m at acquisition.
• The property portfolio should be diversified by sector, location, tenant and lease term, with a maximum weighting to any one property sector or geographic region of 50%.
• To focus on areas with high residual values, strong local economies and an imbalance between supply and demand, acquiring modern buildings or those considered fit for purpose by occupiers.
• No one tenant or property should account for more than 10% of the rent roll at the time of purchase, except for:
• 1. governmental bodies or departments; or
  2. single tenants rated by Dun & Bradstreet as having a credit risk score higher than two16, where exposure may not exceed 5% of the rent roll.
• The Company will not undertake speculative development except for the refurbishment of existing holdings, but may invest in forward funding agreements where the Company may acquire pre-let development land and construct investment property with the intention of owning the completed development.
• The Company may use gearing provided that the maximum LTV shall not exceed 35%, with a medium-term net gearing target of 25% LTV.

The Board reviews the Company's investment objectives at least annually to ensure they remain appropriate to the market in which the Company operates and in the best interests of shareholders.

1. A full version of the Company's Investment Policy is available at custodianreit.com/wp-content/uploads/2021/02/CREIT-Investment-policy.pdf
2. A risk score of two represents "lower than average risk".