The investment manager behind Custodian REIT has warned that “a simple return to pre-Covid-19 pandemic normality by early 2021 appears unlikely”, as a slump in property valuations since the crisis began led to a halving of full-year profit.
Custodian Capital’s Richard Shepherd-Cross said: “It is too early to assess the long-term impact of Covid-19 on the commercial property market but we believe it may accelerate pre-existing trends in the use of, and investment in, commercial property.
“We expect to see a further deterioration in occupational demand and investment appetite for secondary retail, an increase in occupational demand for flexible office space and a continuation of the growth of logistics and distribution.”
Over the year to 31 March, Custodian REIT’s portfolio valuation fell by £25.8m, including a drop of £14.4m in its high street retail assets and £15.3m in its retail warehouse sites. Some £12.5m of the total valuation fall came in the past quarter.
Profit before tax was down 91% to £2.1m. NAV was flat at £426.7m, with NAV per share down 5% at 101.6p.
The company will pay its next two quarterly dividends at a minimum of 0.75p per share regardless of how much rent it collects. “Over the course of the financial year, as deferred rents are collected, the board hopes it will be possible to restore the dividend to a sustainable long-term level akin to previous years,” said chairman David Hunter.
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