12 December 2014

Custodian REIT purchases land with pre-let development in Portishead

Custodian REIT is pleased to announce the completion of a forward funding agreement for a pre-let development along with the purchase of the development land, bringing the total funds invested following its initial placing and admission to the Official List on 26 March 2014 to £61.4 million.

Purchase of land with pre-let development

The Company has acquired 1.48 acres of development land in central Portishead adjacent to a site containing an existing holding in its portfolio, a 60 bed Travelodge, together with a Lidl, Subway and a large format Waitrose. The land is opposite the 245 yacht marina, with modern housing nearby.

The development comprises three retail warehouse/leisure units with construction to be phased over an expected seven month build period. Development funding will be drawn down via monthly certified payments which will attract an annualised coupon of 6.5% until completion.

The units have been pre-let to JD Wetherspoon plc on a 25 year lease with a tenant only break option after 15 years, Majestic Wine Warehouses Limited on a 25 year lease with a tenant only break option after 10 years and Homebargains on a 15 year lease with no break option. On completion of the development for a total consideration of £3.93 million the total passing rent will be £265,000, reflecting a net initial yield of 6.5%.

New term loan

On 9 December 2014, the Company and Lloyds Bank plc entered into an agreement to provide a term loan of £10 million, repayable on 10 October 2019. Under the terms of the agreement, the Company will pay interest of 2.0% above LIBOR per annum on the balance.

The agreed land purchase price of £1.24 million was funded by drawing down the new term loan, resulting in net borrowings increasing to 0.8% loan to value, in line with the stated investment strategy of increasing gearing towards a ratio of 25% loan to value.

Commenting on the acquisition, Richard Shepherd-Cross, Managing Director of Custodian Capital Limited (the Company’s external fund manager), said:

“This development will augment our existing holding in Portishead adding three strong tenants, in modern buildings, let on long leases. We have been working with the developer for nine months to bring this opportunity forwards and believe it will enhance net asset value upon completion, reflecting the move in the market over the period.”