Custodian REIT expands with £22m property portfolio acquisition

LONDON - Custodian Property Income REIT (LSE:CREI) announced today the all-share acquisition of a £22 million property portfolio, marking a strategic expansion of its diversified holdings across the UK. The transaction involves the purchase of a family-owned company, Merlin Properties Limited, and is expected to enhance earnings and reduce net gearing for the REIT.

The portfolio acquired comprises 28 regional investment properties, primarily located in the East Midlands, with an annual aggregate passing rent of £1.7 million. This reflects a net initial yield of approximately 8.1% from 99% occupancy. The properties, 46% of which are industrial, align with Custodian REIT’s income-focused strategy and add diversification by tenant.

Richard Shepherd-Cross, Managing Director of Custodian Capital Limited, the REIT’s Investment Manager, commented on the acquisition, emphasizing the strategic approach to scaling the business through corporate or portfolio acquisitions, especially in a challenging stock market environment.

The transaction is structured as an all-share acquisition, with the initial consideration involving the issuance of 22.9 million new shares in Custodian Property Income REIT. An additional circa 1.7 million shares are expected to be issued within the next six months as deferred consideration. The total expected consideration represents approximately 5.6% of the REIT’s current issued share capital.

David MacLellan, Chairman of Custodian Property Income REIT, expressed confidence in the transaction’s benefits for both new and existing shareholders, highlighting the complementary nature of the property portfolios and the potential for improved tenant diversification and reduced ongoing charges ratio.

Merlin Properties, which has no borrowings, will contribute to a decrease in Custodian REIT’s pro-forma net gearing from 27.1% to 25.8% following the expected sale of approximately £2.7 million of housing stock. Merlin’s Property Manager, Rob Field, will join the Custodian Capital team, bringing valuable expertise and knowledge of the portfolio.

The acquisition avoids certain taxes like SDLT in England and Northern Ireland, and LBTT in Scotland, resulting in savings of about £0.2 million net of stamp duty payable on the Merlin shares acquisition. The new shares issued for the initial consideration are expected to commence trading on June 4, 2025.

This strategic move is based on information from a press release statement and signifies Custodian REIT’s ongoing efforts to scale and enhance shareholder value through prudent acquisitions in the current market.

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