Transcript
Speaker: I'm Martin King, property analyst at Edison Investment Research, and I'm joined by Richard Shepard Cross, fund manager for Custodian Property Income Trust. Good morning, Richard. Good morning. Richard, you've just announced your latest quarterly result. Perhaps you can just say a few words about that, but i think more interesting is developments in the marketplace. So we can go on and talk about that, perhaps.
Speaker: ah Yeah, thank you. um Yes, quarterly results out. um I suppose the headline is no real change, ah continued positivity coming from operational real estate. So another quarter of rental growth, we saw the estimated rental value of our portfolio grow 1% through the quarter.
Speaker: as So it's been maintaining growth. sort of annual rental growth of of about three and three quarter percent for the last four years. So really strongly positive news coming from the coalface. And that means that um against a rent roll of 49 million, the full estimated rental value of the portfolio is a full 15 percent ahead of that at 56.1 million. And that's the excitement for shareholders that you can invest today getting over a 7% dividend yield, but with growth. What's been interesting is that this very positive story from the coalface is at odds with recent share price movements in listed real estate and perhaps particularly in custodians' share price through August. So the question is, why is that happening?
Speaker: I think we often find, because we have a a large cohort of retail investors who on our register. August is a funny month because people are away.
Speaker: And without ah the buying demand to balance day to day selling pressure, we tend to see share prices drift out in August. But there has been um there has been a wider theme and it's probably been driven by Bond rates, we can't escape the fact that property is inversely correlated to bond rates.
Speaker: But i would I would caution people to be too concerned about that connection, because I think at the moment, property is still underpriced.
Speaker: And if you can get over a 7% initial yield with growth, as I've said, versus maybe a 5% return from bonds, but in an inflationary environment, that's perhaps only a 1% or 2% real return, then you're really missing out on that opportunity ah that that the growth from underlying real estate rents provides.
Speaker: So Richard, you're getting rental growth on the portfolio. Also last year, you completed on three corporate acquisitions adding scale to the business. ah Are there prospects for for more of those this year?
Speaker: i'm I'm pleased to say ah that that yes, I mean, we think that this is um a potentially rich pool of opportunity for custodian property income REIT.
Speaker: We are almost uniquely placed um in that we have a diversified regional portfolio very often of smaller properties that are very good fit for the sort of assets that are held in private property companies. So through through the year to March, we completed three acquisitions, adding 62 million of assets to the portfolio. but We are in live discussions at the moment.
Speaker: um So watch this space. I perhaps can't say more than that. But we think that... um We think yeah we will be announcing ah new acquisitions soon, all share acquisitions. So growing the size of the fund, adding to the diversification of the income base and importantly for our existing shareholders, buying real estate at what we believe is the bottom of a cycle.
Speaker: with strong rental growth and income characteristics that will help support earnings in the future. ah But you need to do the work now in order to support your earnings in the years ahead.
Speaker: So yeah, watch this space. I think you'll see more of it from us.
