Custodian Property Income REIT has secured the purchase of a £22m property portfolio, through the all-share acquisition of Merlin Properties.
Custodian is acquiring Merlin through the issuance of 22.9 million new shares, with a further 1.7 million new shares to be issued upon finalisation within the next six months.
This deal will provide Custodian with a £19.4m portfolio of 28 smaller-lot regional UK properties and £2.7m of newly-built housing stock.
These assets are primarily located in the East Midlands and generate an annual aggregate passing rent of £1.7m.
Altogether, this reflects a net initial yield of 8.1% from 99% occupancy.
The portfolio is 46% weighted by income towards the industrial sector.
"I am confident the transaction will benefit both our new and existing shareholders, delivering increased earnings and supporting a fully covered dividend,” said David MacLellan, chair at Custodian.
“The property portfolios of each company are highly complementary and will further enhance tenant diversification, offering defensiveness of income to help mitigate against downside risk, as well as reducing our ongoing charges ratio."
According to senior management at Merlin, with regards to motivation for the sale, management of the portfolio has become “increasingly demanding” in today’s “complex environment.”
All Merlin directors will resign upon completion of the deal, with property manager Rob Field being retained and transferring to the Custodian Capital team.
