Custodian Property Income REIT said “optimism” was returning to real estate markets as it posted a positive quarterly NAV total return for the fourth quarter ended 31 March 2023.
The REIT reported a £2.2m (-0.7% like-for-like) valuation decrease for the quarter, net of a £2.6m (0.4%) valuation increase from active asset management activity, which moved the value of the company’s diversified portfolio of 161 assets to £613.6m.
Richard Shepherd-Cross, managing director of Custodian Capital, said: “We are beginning to see some optimism returning to real estate markets following six months of economic turbulence, which had a direct impact on real estate values. Property pricing has reacted quickly to the new interest rate environment allowing the market to continue to function despite transaction levels remaining low. As a result, and assisted by our asset management initiatives, valuations have largely stabilised during the quarter allowing delivery of a positive quarterly NAV total return.
“Much of the optimism in real estate is due to the prospect of rental growth which is the key component of anticipated total returns. In an inflationary environment, real returns from real assets can be achieved when rents are growing. The company’s portfolio has an EPRA net initial yield of 5.8% and an equivalent yield of 7.3%, demonstrating the reversionary potential of the company’s properties, which we continue to capture.”
Shepherd-Cross said rental growth feeding into the portfolio would “create headroom for eventual refinancing”.
He added: “We remain confident that our ongoing intensive asset management of the portfolio, which still offers a number of wide-ranging opportunities to add value, will maintain cash flow and support consistent returns. Coupled with the strength of the company’s balance sheet, this will continue to support our high income return strategy.”
