Custodian REIT has predicted that more of its tenants will go bust as a result of the Covid-19 pandemic in the coming months, in a sombre interim update which highlighted significant falls in portfolio valuation in the first half of the financial year.
The firm said net asset value for the six months ending 30 September was down 5.1% to £399.7m, while it swung to a £16.1m loss for the period.
Custodian said it had collected 88% of rent due for the period, although this figure was adjusted for contractual rent deferrals.
Nonetheless, the company said it would still pay out a dividend of 2p per share to investors for the period. This was despite the “inevitable disruption to cash collection” caused by the pandemic, according to chairman David Hunter.
“We expect further tenant failures as government support packages are withdrawn, the November 2020 English lockdown and subsequent restrictions bite and while CVAs remain legal, if questionable, practice, but this is likely to be heavily weighted towards the retail sector and should not diminish the overall appeal of real estate,” Hunter said.
However, he also predicted that in a general investment environment characterised by low returns, investors who had abandoned real estate during the pandemic would return in the coming months.
“In a low-return environment we believe that property returns will look attractive and the search for income and long-term capital security will bring many investors back to real estate,” he said.
Yesterday, Custodian announced that it had bought four industrial units totalling 23,250 sq ft on Hilton Business Park in Derby for £1.9m.
The units are occupied by MP Bio Science, Shakespeare Pharma and Jangala Softplay. They have a combined rent of £134,065 per annum and reflect a net initial yield of 6.39%.
