2 November 2015

Custodian REIT completes latest property asset acquisitions

Custodian REIT is pleased to announce the purchases of a further property and a pre-let development site.

Property purchase

The Company has acquired the ground floor and part of the first floor of a leisure development in Abbey Sands, Torquay. The investment comprises four food and drink outlets on the seafront, close to the marina and town centre, let to Le Bistro Pierre Limited, Las Iguanas Limited, Loungers Limited and Jurassic Coast Coffee Limited (trading as Costa Coffee).

The units generate an aggregate passing rent of £285,000 per annum. The agreed purchase price of £4.33 million reflects a net initial yield of 6.22%, with strong occupational demand driving an estimated reversionary yield of 7.10%. The unexpired lease terms range from 10 to 20 years, with an average of 17.5 years.

Land purchase

The Company has also acquired 1.3 acres of development land at the Gunnels Wood Industrial Estate, Stevenage, approximately one mile from junction 7 of the A1(M), with excellent links to the regional motorway network.

The unit has been pre-let to Morrison Utility Services Limited on a 15 year lease, without break, with five-yearly upward-only market rent reviews.

The construction of a 23,161 sq ft warehouse unit will be phased over a seven month build period with funding drawn-down via monthly certified payments, which will attract an annualised coupon of 6.25% until completion. On completion of the development for a total consideration of £3.14 million, including the land purchase price of £1.0 million, the passing rent will be £226,551, reflecting a net initial yield of 7.21% (assuming actual purchaser’s costs).

Both purchases were funded from the Company’s existing credit facilities, with net borrowings following the acquisition of 17.3% loan to value.

Commenting on the acquisitions, Richard Shepherd-Cross, Managing Director of Custodian Capital Limited (the Company’s discretionary investment manager), said:

“Abbey Sands is centrally located on an unrivalled seafront location, with the upper floors occupied by luxury residential apartments. Being in close proximity to the marina and town centre, as well as main hotels and the train station, guarantees excellent accessibility. These factors all lead to high demand and therefore give these units capacity for rental growth. The building itself has been recognised by several property surveying professional bodies, and won the award for best mixed use development at the UK Property Awards 2014/2015.”

“We are also delighted to have secured another development funding opportunity in a prominent and accessible location, with a long-term lease to an excellent tenant. We will continue to pursue development funding opportunities where it is possible to secure brand new buildings in strong locations on long leases which enhance Net Asset Value and extend the weighted average unexpired lease term of the portfolio.”