Custodian Property Income REIT continues to streamline its portfolio, announcing the successful sale of two industrial properties, one in Weybridge and the other in Warrington, for a total of £15 million. The move is aimed at reducing the trust’s loan-to-value ratio by 2%, according to a press release issued on 2 April.
The sale of the industrial unit in Weybridge fetched £6m, while the vacant industrial unit in Warrington commanded £9m. These transactions were part of Custodian Property Income REIT’s strategy, previously disclosed in an announcement made on 28 February 2024. The prices achieved represent premiums of 5.2% (£0.3m) and 61% (£3.4m) respectively, over the valuations recorded at the end of December 2023.
Richard Shepherd-Cross, the managing director of Custodian Capital Limited, the REIT’s external fund manager, commented on the sales strategy. “While planning consent has been received to redevelop the Warrington site, we believe that, due to a lack of occupier demand and the ability to crystallise a substantial profit for our shareholders, now is the best time to sell. Selling vacant property is particularly accretive to earnings by both saving void costs and reducing interest expense.”
The Weybridge property, acquired in 2019 as part of a sale-and-leaseback portfolio deal with Menzies Distribution, has provided a steady income over the past four years. However, following a re-letting of the unit in 2022 at an increased rental rate, the company has decided to divest it. “We believe future rental growth may not meet our income growth expectations going forward,” explained Shepherd-Cross.
This announcement reportedly comes on the heels of Custodian Property Income REIT’s agreement on terms for two additional property sales, including industrial units in Redhill and Castle Donington, which bring the total assets under offer for sale since 31 December 2023, to four. With these disposals, the company is set to generate an aggregate of £19.5m, representing a premium of 29% over the valuations recorded at the end of December 2023.
The company has been proactive in its sales strategy, having already completed the sale of an industrial unit in Milton Keynes and an office building in Derby in January 2024 for a total of £10.1m. Shepherd-Cross shared with Insider that the successful completion of these sales would significantly enhance annual recurring earnings, potentially adding approximately 5% on a proforma basis for the 12-month period ending 31 December 2023.
The sales are anticipated to be finalised over the next two months, with the Warrington disposal slated for completion in mid-April 2024. The total proceeds of £15m from the recent transactions will be utilised to repay Custodian Property Income REIT’s existing revolving debt facility, thereby reducing its loan-to-value ratio by around 2%.
