Custodian REIT (CREI) is an income-orientated REIT focused on UK commercial property outside London. Its portfolio of 133 properties is diversified by both geography and sector, is valued at c £420m, has 98% occupancy and an LTV of just 18%. Management’s focus is on long-term secure income, to deliver the earnings to cover a sustainable growth in dividends. Growth in NAVPS also contributes to CREI’s total return, despite the high payout ratio and regular share issues to part-fund the acquisitions. We believe the 7% premium to FY17e NAV is justified by the conservative gearing and one of the highest dividend yields in the sector.
