5 January 2016

Custodian REIT acquires a £55.1 million portfolio of properties

Custodian REIT is pleased to announce the acquisition of a £55.1 million portfolio of properties (“the Portfolio”).

Property purchase

The portfolio comprises four retail sites in Colchester, Guildford, Portsmouth and Winnersh, three industrial properties in Chepstow, Redditch and Warrington, and two offices in Edinburgh and West Malling, with an average lot size of £6.1 million. Occupiers include House of Fraser, Tesco, Reiss, Poundworld, Regus, Amco Services, Laura Ashley, H Samuel, Pets at Home, and Wickes.

The Portfolio represents nine of the 11 properties in the ‘Target Portfolio’ described in the Company’s November 2015 prospectus, with the Company having sub-sold the remaining two properties in the Target Portfolio, comprising an industrial unit in Norbiton and three shops with offices above in Richmond at prices of £5.8 million and £8.6 million respectively, reflecting a blended net initial yield of sub 5%.

The Portfolio’s current passing rent of £3.68 million reflects a net initial yield of 6.32%, with an expected reversionary yield of 6.89%. Following acquisition of the Portfolio, the Company’s average weighted unexpired lease term is 6.8 years.

The purchase price of £55.1 million was funded using the Company’s existing cash and debt facilities, following an issue of new shares in December 2015, which raised £44.25 million (before costs and expenses). The Company’s net borrowings following the acquisition have increased to 20.7% loan to value.

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

“The Portfolio is an excellent fit with our investment strategy, comprising smaller lot size, good quality, secondary office, retail and industrial assets diversified by tenant and region. I expect this substantial addition to Custodian REIT’s existing portfolio to present economies of scale and enhance returns to shareholders through the prompt deployment of proceeds from the recent share issue, improving dividend cover. The Portfolio offers medium-term income security together with the potential for a number of asset management opportunities identified during the due diligence process.”