Custodian REIT (LSE: CREI), the UK property investment company focused on smaller regional property, is pleased to announce the acquisition of a 91,955 sq ft distribution facility between Glasgow and Edinburgh for £11.125 million, reflecting a net initial yield1 of 5.25%.
The property benefits from a strategic logistics location on the Eurocentral industrial estate, at Junction 7 of the M8, 15 miles from Glasgow and 35 miles from Edinburgh. The asset is fully let to Gist, a national distribution business, with five years remaining on the lease and three years to a break option, and producing a passing rent of £623,160 per annum.
The acquisition was funded from the Company’s existing debt facilities, increasing net gearing2 to 24.0% loan to value, which remains within the Company’s 25% target.
This acquisition increases the industrial weighting within the Company’s highly diversified portfolio of 165 properties to 48% by value.
Richard Shepherd-Cross, Managing Director of Custodian Capital Limited (the Company’s discretionary investment manager), commented: “This well located, modern industrial asset has been acquired off-market at an attractive net initial yield of 5.25%. We see scope to significantly increase the rental intake of this conservatively let asset based on recent local comparables combined with strong occupational demand, meaning we expect the reversionary yield3 on purchase price to move towards c. 7%. This purchase highlights the yield advantage offered by the Company’s smaller regional property strategy of acquiring strong and secure assets with the potential for future income and valuation growth.”
1 Passing rent divided by purchase price plus assumed purchasers’ costs.
2 Gross borrowings less cash (excluding tenant rental deposits and retentions) divided by last published property portfolio valuation.
3 Reversionary rent divided by purchase price plus assumed purchasers’ costs.
