Custodian Property Income REIT (CREI) Investor Update summary

Market outlook and timing

• Forecasts indicate stronger property returns in 2025, driven by resilient occupational markets, robust rental growth, improved sentiment, and lower debt costs.

• Property values have rebounded gently since mid-2024, marking a turning point after a 20% market-wide decline since 2022.

• Rental growth is evident across industrial, logistics, office, and retail sectors, with industrial/logistics leading.

• The window for real estate investment remains open, with expectations of quick market movement once capital returns.

• Real estate investment is best viewed over a five- to seven-year horizon, aligning with lease cycles and value creation.

Portfolio performance and income

• Rental growth has increased the portfolio's passing rent from £41m to £44m in two years, with an 11% reversionary potential.

• Occupancy improved from 90% to 93.5%, supporting a dividend increase from £0.055 to £0.06 per share, fully covered by earnings.

• Profitable asset sales reduced loan-to-value to 28.5%, and recent rent reviews delivered 12%-64% increases.

• Diversification across sectors and regions mitigates risk, with no single tenant representing more than 1.5% of rent roll.

• Over 80% of tenants are rated lower than average risk, supporting income quality and dividend sustainability.

Sector trends and strategy

• Industrial/logistics assets continue to benefit from undersupply and inflationary build costs, driving rental growth.

• Offices and retail assets in prime locations have shown strong rental uplifts, with notable lease renewals and new lettings.

• Retail warehousing is highlighted as a sector with strong demand and further rental growth potential.

• The strategy focuses on smaller regional assets, capturing a yield premium without additional risk, and delivering higher dividends.

• The portfolio avoids London, targeting regional commercial hotspots for better yields and lower volatility.