Custodian Property Income REIT plc: All-share Acquisition of GBP22m Property Portfolio

DJ Custodian Property Income REIT plc: All-share Acquisition of GBP22m Property Portfolio

Custodian Property Income REIT plc (CREI) 
Custodian Property Income REIT plc: All-share Acquisition of GBP22m Property Portfolio 
02-Jun-2025 / 07:00 GMT/BST 
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2 June 2025 
 
Custodian Property Income REIT plc 
 
("Custodian Property Income REIT" or "the Company") 
 
All-share Acquisition of GBP22m Property Portfolio 
 
   -- Strategic acquisition of a highly complementary diversified portfolio of small lot-size UK assets 
   -- Accretive transaction delivers day one earnings enhancement and the potential for value creation through 
  asset and portfolio management opportunities 
   -- Underscores the effectiveness of the Company's listed REIT structure facilitating the all-share 
  acquisition of an ungeared family property company: 
   -- Tax efficient solution for the sellers 
   -- Share register augmented by the sellers' retained ownership interests in the Company 
   -- Reduces the Company's loan-to-value and ongoing charges ratios 
 
Custodian Property Income REIT (LSE: CREI), which seeks to deliver an enhanced income return by investing in a 
diversified portfolio of smaller, regional properties with strong income characteristics across the UK, is pleased to 
announce the purchase of a GBP22.1m portfolio via the all-share acquisition of a family property company ("the 
Transaction"). 
 
The Transaction provides the Company with a GBP19.4m portfolio of 28 smaller lot-size regional UK investment properties 
(the "Investment Portfolio") which are highly complementary to the Company's existing assets, as well as c. GBP2.7m of 
newly built housing stock, the ongoing sale of which is expected to conclude in the next few months, generating 
additional cash for the Company. 
 
The Investment Portfolio, with an average lot-size of GBP0.7m, is primarily located in the East Midlands and generates an 
annual aggregate passing rent of GBP1.7m reflecting a net initial yield of c.8.1%, from 99% occupancy. The Investment 
Portfolio is 46% weighted by income towards the industrial sector, in line with the Company's existing portfolio, with 
the remaining income spread broadly evenly between generally well-located offices and retail properties, both high 
street and edge of town retail parks. 
 
The Investment Portfolio's top ten assets cover c. 75% of rent and value, with the top 15 occupiers accounting for 50% 
of the annual contracted rental income, and no single tenant comprising more than 5% of the total rent roll. 
 
The Investment Manager has already identified a number of opportunities to drive further value from the Investment 
Portfolio by utilising its asset and portfolio management expertise to increase rental income from lease events and 
improve certain properties' environmental credentials. 
 
Transaction structure and consideration 
 
The Company is acquiring the entire issued share capital of Merlin Properties Limited ("Merlin") which will be 
satisfied through the issuance of 22.9m new shares in the Company as initial consideration on an adjusted net asset 
value ("NAV") for NAV basis (the "Initial Consideration"). A further c. 1.7m new shares are expected to be issued on 
finalisation of completion accounts within the next six months (the "Deferred Consideration"). Total expected 
consideration represents approximately 5.6% of the Company's current issued share capital. 
 
Commenting on the Transaction, Richard Shepherd-Cross, Managing Director of Custodian Capital Limited "Custodian 
Capital"), the Company's Investment Manager, said: "We have been clear that a key element of our strategy is to seek 
opportunities to scale the business through corporate and/or portfolio acquisitions. In an environment where current 
market conditions make further capital raisings through the stock market challenging, this strategic transaction via an 
all-share acquisition on an adjusted NAV-for-NAV basis allows us to circumnavigate that issue and continue to grow. In 
addition to enhancing earnings per share and decreasing net gearing, the Transaction provides us with a portfolio that 
is both a strong fit with our income-focused strategy and highly complementary to our existing property portfolio, 
augmenting our regional, industrial bias and adding further diversification by tenant. 
 
"For Custodian Property Income REIT shareholders, the Transaction also offers compelling economic benefits for the 
Company versus acquiring the properties directly, demonstrating our commitment to enhancing shareholder value and 
securing economies of scale through growth. 
 
"The Transaction presented an attractive opportunity for the sellers to solve a family succession issue, defer 
crystallisation of a latent capital gain and obtain a more liquid investment, whilst maintaining the focus of their 
family wealth on regional real estate investments with attractive income characteristics. 
 
"We believe many other family property companies in the UK will face similar succession and tax issues and we hope to 
use the Transaction as a blueprint for further opportunities to achieve scale in the current environment." 
 
David MacLellan, Chairman of Custodian Property Income REIT, added: "I am confident the Transaction will benefit both 
our new and existing shareholders, delivering increased earnings and supporting a fully covered dividend. 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." 
 
Hubert Lynch, Founder Director of Merlin Properties Limited, said: "Operating the Merlin portfolio, which our family 
has compiled and managed over the last 40 years, has become increasingly demanding in today's complex environment. We 
have undertaken the Transaction in a tax efficient manner to ensure our family's continued exposure to property 
investment both currently and for future generations through a professionally managed fund with a strong track record. 
As already significant, supportive shareholders of Custodian Property Income REIT we have a strong relationship with 
the Investment Team which we look forward to continuing for many years." 
 
Gearing 
 
Merlin has no borrowings and once the expected sale of c. GBP2.7m of housing stock completes during the coming months, 
the Transaction will decrease the Company's pro-forma net gearing from 27.1% LTV to 25.8%. 
 
Directors and employees 
 
On completion of the Transaction, the Merlin Board will resign as directors with immediate effect. Rob Field, Merlin's 
Property Manager, will be retained and transfer to the Custodian Capital team, allowing the Company to benefit from his 
wealth of expertise and knowledge of the Investment Portfolio, whilst providing further experience and strength in 
depth for Custodian Capital. 
Rationale 
 
The Custodian Property Income REIT Board believes there is a compelling strategic rationale for the Transaction: 
 
   -- Merlin's portfolio is complementary to the Company's, based on its smaller lot-size, diversified property 
  strategy and current sector and geographical weightings; 
   -- The Transaction is expected to enhance earnings per share and dividend cover, increase tenant 
  diversification and reduce both the Company's ongoing charges ratio and net gearing. 
   -- Opportunity for further value creation from the Investment Portfolio through asset and portfolio 
  management by utilising Custodian Capital's experience. 
   -- As the Transaction is structured as a corporate acquisition, neither SDLT in England and Northern 
  Ireland, nor LBTT in Scotland will be payable on acquiring the Investment Portfolio, leading to savings of 
  approximately GBP0.2m (net of stamp duty payable by the Company on the acquisition of the Merlin shares) compared to 
  an equivalent property acquisition. 
 
Issue of equity 
 
An application has been made for 22,928,343 New Ordinary Shares in relation to the Initial Consideration to be admitted 
to the premium segment of the Official List, and to trading on the London Stock Exchange's Main Market for listed 
securities ("Admission"). It is expected that Admission will become effective and dealings in the New Ordinary Shares 
will commence at 8am on 4 June 2025. The New Ordinary Shares will rank pari passu with the ordinary shares already in 
issue. 
 
Following Admission, the Company's issued share capital will consist of 463,778,741 ordinary shares. Therefore, the 
total number of voting rights of the Company is 463,778,741 and this figure may be used by shareholders as the 
denominator for the calculations by which they will determine if they are required to notify their interest in, or of a 
change to their interest in, the Company under the FCA's Disclosure and Transparency Rules. 
 
- Ends - 
 
Further information: 
 
Further information regarding the Company can be found at the Company's website custodianreit.com or please contact: 
 
Custodian Capital Limited 
Richard Shepherd-Cross - Managing Director 
Ed Moore - Finance Director         Tel: [phone] 
Ian Mattioli MBE DL - Chairman 
                      www.custodiancapital.com 
Numis Securities Limited 
Hugh Jonathan / George Shiel Tel: [phone] 
               www.numis.com/funds 
FTI Consulting 
Richard Sunderland / Ellie Sweeney / Andrew Davis / Oliver Parsons Tel: [phone] 
                                  [e-mail] 

Notes to Editors

Custodian Property Income REIT plc is a UK real estate investment trust, which listed on the main market of the London Stock Exchange on 26 March 2014. Its portfolio comprises properties predominantly let to institutional grade tenants throughout the UK and is principally characterised by smaller, regional, core/core-plus properties.

The Company offers investors the opportunity to access a diversified portfolio of UK commercial real estate through a closed-ended fund. By principally targeting smaller, regional, core/core-plus properties, the Company seeks to provide investors with an attractive level of income with the potential for capital growth.

Custodian Capital Limited is the discretionary investment manager of the Company.

For more information visit custodianreit.com and custodiancapital.com.

----------------------------------------------------------------------------------------------------------------------- Dissemination of a Regulatory Announcement that contains inside information in accordance with the Market Abuse Regulation (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.

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ISIN:      GB00BJFLFT45 
Category Code: MSCH 
TIDM:      CREI 
LEI Code:    2138001BOD1J5XK1CX76 
OAM Categories: 3.1. Additional regulated information required to be disclosed under the laws of a Member State 
Sequence No.:  391231 
EQS News ID:  2148458 
 
End of Announcement EQS News Service 
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June 02, 2025 02:00 ET (06:00 GMT)