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Custodian Property maintains quarterly dividend

11:20 01/05/24

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Asset custodian The company maintained a fourth-quarter dividend of 1.375p, it confirmed on Wednesday, fully covered by EPRA earnings per share of 1.5p.

The London-listed real estate investment trust also announced a special dividend of 0.3p for the 2024 financial year, increasing the total dividend for the year from 5.5p to 5.8p.

Looking ahead, Custodian Property said it was targeting a target dividend of 6p in 2025, representing a 9% increase over 2024 and a yield of 8.1% based on the prevailing share price of 74p.

Custodian Property reported robust leasing activity during the quarter, with a chargeback of 15%, supporting rental growth and higher fully funded dividends.

The like-for-like ERV increased by 0.8% since December 31, mainly due to rental growth in the industrial sector.

The company’s portfolio showed significant turnaround potential, the board said, with portfolio ERV exceeding rent by 15%.

Notably, rental prices increased by 1.7% during the quarter, driven by strong tenant demand across all sectors.

Rent reviews paid during the quarter were on average 7% higher than the ERV and 29% higher than the previous rent.

13 new leases and regears were also signed, securing £1.4 million in annual rentals and increasing the capital value of the property by £2 million.

Custodian Property’s EPRA occupancy rate rose to 92%, rising to 94% when excluding the vacant ERV currently on offer.

Custodian Property’s £589.1 million portfolio valuations remained stable on a like-for-like basis during the quarter.

Asset recycling efforts were successful, with properties sold for returns that exceeded valuations.

Notably, additional properties have sold since the end of the quarter at significant premiums above December 31 valuations.

The company said it is continuing its redevelopment and renovation activities and expects revenues to be above average financing costs.

Capital expenditure of £0.9 million during the quarter was expected to improve asset valuations and the environment, ultimately increasing rents and delivering a return on costs of at least 7%.

Custodian Property said it maintained prudent debt levels, with a net leverage ratio of 29.2% at March 31, slightly lower than in the previous period.

The sale of real estate has further reduced the pro-forma net debt ratio, in line with the medium-term target of 25%.

In addition, the weighted average cost of total loans decreased to 4.1%, contributing to overall financial stability.

“These dividend increases, which are expected to be fully covered by net rental income, reflect the improving earnings characteristics of the company’s portfolio with recent asset management initiatives and sales of vacant properties, increasing occupancy and crystallizing rental growth” , said chairman David MacLellan.

“Our investment manager continues to keep costs under tight control, while the company’s largely fixed-rate debt profile keeps financing costs below current market rates.

“The board’s objective, as previously stated, is to continue to grow the dividend on a sustainable basis, at a pace that is fully covered by net rental income and that does not hinder the flexibility of the company’s investment strategy.”

At 11am BST, shares in Custodian Property Income REIT were up 0.48% at 74.56p.

Reporting by Josh White for