Custodian Property Income REIT acquires Grove Court Properties

Custodian Property Income REIT (CREI) has acquired Grove Court Properties, a family property company, for £35.9 mln (€42.1 mln).

Property

This acquisition adds a diverse set of seven mixed-use properties near the M25 on the eastern outskirts of Greater London (Beaconsfield and Gerrards Cross). They have an average value of £5.3 mln (€6.2 mln) and a high occupancy rate of around 97%.
The deal is expected to boost CREI's annual rental income by approximately 6%, adding £2.7 mln (€3.2 mln) and achieving a net initial yield of 6.8%. The acquisition was funded through a combination of 24.1 million new shares issued upfront, an estimated 0.8 million deferred shares, a £0.3 mln (€0.35 mln) cash "overage" payment, and £9.0 mln (€10.5 mln) in cash.
This move aligns with CREI's growth strategy, providing a complementary portfolio, enhancing earnings per share and dividend cover, and diversifying its tenant base. Additionally, the structure of the deal as a corporate acquisition avoided Stamp Duty Land Tax, saving the company around £0.2 mln (€0.23 mln). The existing property management team from Grove Court Properties will join CREI, bringing valuable expertise.
Commenting on the Transaction, Richard Shepherd-Cross, managing director of Custodian Capital, the Company’s Investment Manager, said: “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.”
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.
Custodian Property Income REIT’s portfolio comprises of smaller, regional, core/core-plus properties predominantly let to institutional-grade tenants.