Midlands-based Custodian Property Income REIT has acquired a family property portfolio in a deal worth £36m.
The listed company has confirmed the purchase of a £35.9m portfolio via the acquisition of Grove Court Properties (Holdings).
With an average lot-size of £5.3m, the seven assets within the investment portfolio are located in close proximity to the M25 motorway on the eastern outskirts of Greater London (Beaconsfield and Gerrards Cross).
Richard Shepherd-Cross, managing director of Custodian Capital, the company’s investment manager, said: “We have been clear that we have strong ambitions to continue scaling the business through selective portfolio acquisitions. Last year’s Merlin transaction provided a strong blueprint of how we can utilise the combination of our listed status and smaller-lot size investment strategy to provide a solution to family offices seeking to exit or simplify the ownership structure of their property holdings.
“This solution led to the initial discussions for the transaction as well as those relating to the healthy pipeline of similar opportunities we are progressing. This is particularly important as we seek to continue to grow the company against a challenging capital markets backdrop.
“The acquisition we are announcing today gives us another high-quality and complementary portfolio which enhances earnings per share and improves dividend cover without impacting net gearing. It is a further demonstration of our commitment to generating shareholder value and the benefits of disciplined consolidation.
“We believe many other family property companies face similar succession and tax issues in the UK. The listed REIT structure offers a tax efficient solution for the sellers, extinguishing the latent chargeable gains and potentially deferring the crystallisation of a latent capital gain, whilst obtaining a more liquid and easily tradeable investment.”
David MacLellan, chairman of Custodian Property Income REIT, added: “The addition of this portfolio will enhance tenant diversification and provide further defensive income to drive earnings, while reducing our ongoing charges ratio and maintaining the balance sheet strength.
“In a short space of time, this innovative strategy of using our shares to acquire family held property holdings has proved to be an effective way to achieve scale. We will continue to pursue further opportunities in this space, enabling family-owned businesses to benefit from our income focused strategy alongside existing shareholders.
“The ability of the company to use its shares as consideration, issued at adjusted NAV, is an endorsement of the company’s long-term strategy and the appeal of the income it is able to generate from a diversified portfolio of commercial property.”
On completion of the transaction, the GCP board resigned as directors with immediate effect.
Dan Pilling, outgoing director of GCP, said: “While the GCP portfolio has been curated and maintained under family ownership for the last 40 years, it has become increasingly difficult to manage this investment both in today’s environment and as we start to plan to pass it on to the next generation.
“This transaction with Custodian Property Income REIT has provided us with a tax efficient solution and simplified ownership structure that ensures our family can continue to benefit from our property investments but within a larger, more diversified portfolio and through a professionally managed fund with a strong track record of income returns.
“We have built an excellent working relationship with the Custodian team and we look forward to continuing this in the future.”