Menzies Distribution Limited (MDL) has sold via a sale and leaseback transaction to Custodian REIT, the Leicester-based property investment company, a portfolio of properties worth £24.65 million. Included in the portfolio are eight “last mile” distribution units spread throughout the UK, each with a passing rent of £1.61 million, reflecting a net initial yield of 6.4 per cent.
“The Portfolio is strongly aligned to Custodian REIT’s investment strategy and complementary to its existing property portfolio. The pricing advantage of pursuing a smaller lot size, regional strategy is evident when compared with pricing in the highly competitive market for logistics assets. This acquisition enhances the WAULT of the company’s property portfolio, supplements regional diversification and additionally provides secure cash flow with the certainty of fixed rental uplifts in 2024,” said Richard Shepherd-Cross, managing director of the company’s discretionary investment manager Custodian Capital.
Custodian REIT acquired the properties from Menzies Distribution by purchasing the entire issued share capital of John Menzies Property 4 Limited, which owns the portfolio. All eight properties are being let on new 10 year leases with only one unit having a second-year break option.
“Following this transaction, MDL will become Custodian REIT’s largest tenant, but still representing only 3.9 per cent of the rent roll. No one property in the portfolio will account for more than 0.7 per cent of the Company’s rent roll, supporting the continued drive to mitigate risk through diversification and stock selection. We are very pleased to enter into a long term relationship with MDL, a dynamic company offering a strong tenant covenant,” added Richard Shepherd-Cross.
“The corporate transaction offered compelling economic benefits for the company and the vendor, compared to the company acquiring the properties directly, demonstrating our commitment to enhance shareholder value and secure economies of scale through growth in the fund,” he continued.
The acquisition was funded using the company’s existing debt facilities.