Richard Shepherd-Cross, manager of Custodian Property Income (LON: CREI), says ‘all the lights are green’ for the investment trust. The FY26 10% NAV total return, the highest since FY22, was driven by rental growth, higher valuations and higher occupancy.
The trust, which invests in smaller regional UK properties with strong income potential, saw a 26% increase in IFRS pre-tax profit to £48.3 million. IFRS EPS (earnings per share) rose 20% to 10.4p, while EPRA EPS rose 3.3% to 6.3p resulting in a fully-covered dividend.
Like-for-like rents rose 3.4% with just under a third of properties enjoying new lettings, lease renewals amd lease regears. Continued occupier demand for space meant nine rent reviews were completed with an average 6% uplift on the previous year.
The estimated rental value of the portfolio rose 3.3% meaning there is 13% potential rentalk growth embedded in the portfolio. ‘Rents are continuing to grow in front of us’, Shepherd-Cross told Sharesify.
While rising rents were fundamental in increasing NAV, valuations also rose across the board including offices and retail. ‘The whole market is past the low point and we see positive returns ahead’, added Shepherd-Cross.
We have long been fans of Custodian REIT and the management team. The combination of quality assets, active management and the ability to scale has been central to the firm’s success.
On the latter point, the company has bought three privately-owned portfolios in the last year with its own shares. In one go, it has solved succession and tax issues for the family owners while acquiring quality assets with embedded rental growth.
If interest rates are going to stay high rather than falling as everyone hoped, the portfolio is well positioned. Debt is locked in at just over 4% against an initial yield of 6.4% before reversion potential.
