Custodian Property Income (CREI) has quickly made good on its intention to expand through acquisition, announcing the purchase of Grove Court Properties, a £36m portfolio that has been family owned for 40 years.
It was only on Friday the £408m real estate investment trust said it was in “initial talks” with a number of wealthy families about taking on their property interests. Today it unveiled the purchase of Grove Court’s seven properties near London’s M25 motorway that it said would immediately lift earnings, boost dividend cover and cut the proportion of charges shareholders pay on its assets.
This is Custodian’s second such acquisition since it bought the Merlin portfolio for £22m last summer. The company is paying 5.4% of its current market value by issuing a total of 24.9m shares at their adjusted net asset value plus £9.3m cash.
It said the mixed-use small properties in the investment portfolio had around 97% occupancy, annual rent of £2.7m that would add 6% to CREI’s annual rent roll with a net initial yield of 6.8% and gearing of 25%, in line with its 26% level of borrowing.
Grove Court’s property manager, assistant property manager and maintenance manager have transferred to Custodian Capital, CREI’s fund manager, to provide their expertise and knowledge of the portfolio.
CREI looked to family offices for expansion after it missed out on acquiring Abrdn Property Income in 2024.
Fund manager Richard Shepherd-Cross said the acquisition of another high quality and complementary portfolio was “a further demonstration our commitment to generating shareholder value and the benefits of disciplined consolidation.”
Chair David MacLellan added: “We will continue to pursue further opportunities in this space, enabling family-owned businesses to benefit from our income focused strategy alongside existing shareholders.”
Dan Pilling, one of the Grove Court directors who has resigned following the acquisition, said it had become increasingly difficult to manage the investments for his family and plan how to pass them 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 ensure 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.”
CREI shares firmed 0.3p to 89.3p on a discount of around 8% to net asset value and a 6.7% dividend yield.
Stay a step ahead. Our daily newsletter brings you the latest on investment trusts and active ETFs. Subscribe here.
