Custodian REIT buys property portfolio, plans £20m fund raise

Custodian REIT has announced the acquisition of a GBP26.75 million portfolio of properties. The portfolio comprises 10 light industrial sites spread throughout the UK with a current passing rent of GBP2.21 million reflecting a net initial yield of 7.86%, with an expected reversionary yield of 8.03%.  The portfolio’s weighted average unexpired lease term (“WAULT”) is 5.4 years. The acquisition was funded using the Company’s existing cash and debt facilities, increasing the Company’s borrowings to 20.7% loan-to-value.

Richard Shepherd-Cross, Managing Director of Custodian Capital Limited (the Company’s discretionary investment manager), said: “The portfolio is a strong fit with our investment strategy and is complementary to our existing property portfolio, augmenting our regional, industrial bias and adding diversification by both tenant and location.  The portfolio was compiled between 2011 and 2015 but is being sold due to the vendor restructuring its funds business.  This provides Custodian REIT with opportunities to continue the asset management plan and enhance value. We agreed terms at the height of market uncertainty regarding the EU referendum and anticipate a valuation increase at 30 September 2016 as market sentiment recovers.  This corporate transaction offered compelling economic benefits for the Company and the vendor versus the Company acquiring the properties directly, demonstrating our commitment to enhance shareholder value and secure economies of scale through growth in the fund.”

Following the acquisition, the Board today announces that the company intends to raise additional equity capital through the issue of new ordinary shares by way of a placing.  The Board proposes to raise gross proceeds of up to GBP20 million, with the ability to increase this dependent on demand and pipeline opportunities. The new shares will be issued at a premium of 3.5% to the unaudited net asset value per share as at 30 September 2016, to be published on 14 October 2016.

Details of each property within the Portfolio are set out below: 

West Bromwich – a 59,973 sq ft unit, five miles north-west of Birmingham city centre and 0.6 miles from junction 1 of the M5 providing access to the M6, M42 and M40.  The property is let to Oyez Straker Group Limited with an unexpired term of 11.5 years and passing rent of GBP280,000 per annum.  Nearby occupiers include Interlink Express, Keltruck, and Office Team.  Hawthorns Business Park is an established location and the lease is subject to five yearly fixed rental uplifts, which guarantees future rental growth.

Christchurch – a 34,046 sq ft unit within eight miles of Bournemouth and with good access to the M27.  The property is let to Interserve Construction Limited with an unexpired term of 6.5 years and passing rent of GBP199,496 per annum.  Nearby occupiers include Screwfix, Lidl, Wickes and Howdens Joinery.  The tenant has recently installed a significant amount of fixed plant, demonstrating their commitment to the location.

Sheffield – a 23,000 sq ft unit with access to junctions 33 and 34 of the M1.  The property is let to Arkote Limited with an unexpired lease of 7.6 years and passing rent of GBP120,750 per annum.  Nearby occupiers include Jack Wills, FPS Distribution, HSS Hire and Hertz.  This is a modern building in an established industrial location situated between Sheffield city centre and the M1 Motorway.

Warrington – a 40,810 sq ft unit with excellent access to the M6, M63 and M56.  The property is let to Dinex Limited with an unexpired lease of 9.5 years and passing rent of GBP183,645 per annum.  Nearby occupiers include Norbert Dentressangle, Iceland, Marks and Spencer and DHL.  This property acts as Dinex’s UK headquarters.  The tenant recently entered into a 10 year lease renewal to December 2025.

Warrington – a 66,990 sq ft recently refurbished unit with excellent access to the M6, M63 and M56.  The property is let to DHL Supply Chain Limited with an unexpired lease of 4.8 years and passing rent of GBP229,653 per annum.  At GBP3.43 per sq ft the unit is under-rented and an outstanding April 2016 rent review provides opportunity for an immediate uplift.

Manchester – a 21,357 sq ft unit nine miles south-west of Manchester and nearby junctions 11 and 12 of the M62. The property is let to Northern Commercial Limited with an unexpired lease term of 9.9 years and passing rent of GBP140,000 per annum.  Nearby occupiers include DPD, Ceva Logistics, Screwfix and FX Sameday.  This modern commercial vehicle maintenance/repair unit has an extremely low site cover of only 19%, providing potential for further development.

Atherstone – a 23,046 sq ft industrial estate near to the A5 which links the M1 and M6.  The property is let to North Warwickshire Borough Council with an unexpired lease of 3.8 years and passing rent of GBP115,000 per annum.  Nearby occupiers include Aldi (UK Head office), 3M and TNT.  This is an established industrial and distribution location and the site has short-term asset management opportunities.

Westerham – a 19,300 sq ft unit located 23 miles south of central London and 22 miles from Gatwick Airport with excellent access to junction 5 of the M25 and junction 21 of the M6.  The property is let to Aqualisa Products Limited with an unexpired lease of 9.2 years and passing rent of GBP135,000 per annum.  The tenant has recently consolidated its operations to this site, emphasising its belief in the strength of the location.  Industrial space in this area is in short supply, leading to upward pressure on rents and the likelihood of rental growth at rent review or lease renewal.

Gateshead – six well specified warehouse/distribution units occupying a total of 83,025 sq ft adjacent to the Metrocentre with excellent access to the A1.  The units are let to Boots UK Limited, WH Partnership Limited, Rexel UK Limited, Travis Perkins (Properties) Limited and The Human Office Limited with a WAULT of 1.7 years and passing rent of GBP331,200 per annum.  Significant asset management opportunities have been identified at this property which, once complete, will enhance value.

Kettering – eight modern industrial/warehouse units of 65,034 sq ft located near to junction 9 of the A14 which links the M1, A1(M) and M11.  The units are let to VP Packaging Limited, DP Press Limited, Nital Training Academy Limited, Rapid Vehicle Repairs Limited and Equinox Aromas Limited with a WAULT of 6.6 years and passing rent of GBP278,350 per annum.  Nearby occupiers include Weetabix, Alpro and Knights of Old Group.  This location is experiencing high demand for industrial units of this specification.

CREI : Custodian REIT buys property portfolio, plans £20m fund raise

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