Custodian Property reports 'immediate capital upside' from Merlin deal

Custodian Property Income REIT PLC on Wednesday said the Merlin properties are ‘integrating well’ following the transaction earlier this year.

Back in June, the Leicester, England-based real estate investment trust said it purchased a £22.1 million portfolio via the acquisition of family property firm Merlin Properties Ltd.

Since the transaction, Custodian Property said Merlin occupancy remains strong at near 100%, with opportunities identified to drive value from higher rental income from upcoming lease events.

The REIT said the deal has generated ‘immediate capital upside’ through the disposal of two non-core Merlin properties for £600,000, in aggregate 16% above the purchase price.

It added that a further five non-core assets sold 46% ahead of purchase price at a recent auction. These sales are expected to bring in £2.2 million upon completion later this month. Custodian Property added that these proceeds are to be ‘recycled into value enhancing opportunities within the wider portfolio’.

Shares in the trust were 2.2% higher at 78.51 pence on Wednesday afternoon in London.

‘The ongoing disposal of non-core assets has already crystallised a profit and once again demonstrates both our ability to achieve sales ahead of purchase price as well as the continued strength of purchaser demand for smaller lot-sized assets. We expect to use the proceeds to fund improvements to the existing portfolio and our ongoing share buyback programme,’ said Richard Shepherd-Cross, managing director of Custodian Capital Ltd, the company’s investment manager.

‘Looking ahead, we hope to position the company for further growth by targeting similar opportunities for increased scale, which offer a more liquid investment and attractive income returns, while providing tax efficient solutions for family property companies in the UK.’

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