Custodian bets on retail warehouses
Custodian REIT has bought two retail warehouses for £9m.
The stores, in Measham, Leicestershire, and Droitwich, Worcestershire, total just over 40,000 sq ft and are both let to DFS Furniture on long leases at a total passing rent of £894,103 per annum. That equates to a net initial yield of 9.43%.
Richard Shepherd-Cross, managing director of Custodian Capital, the REIT’s discretionary investment manager, said: “These high-yielding assets let on long-term leases to a strong covenant are a great addition to our portfolio. Retail warehouses continue to demonstrate their relevance and appeal alongside the continued rise of e-commerce, with one out of three sofas sold in the UK purchased in-store, while the ‘halo’ effect of a physical store supporting local online purchases is particularly strong for furniture.”
Custodian REIT has bought two retail warehouses for £9m.
The stores, in Measham, Leicestershire, and Droitwich, Worcestershire, total just over 40,000 sq ft and are both let to DFS Furniture on long leases at a total passing rent of £894,103 per annum. That equates to a net initial yield of 9.43%.
Richard Shepherd-Cross, managing director of Custodian Capital, the REIT’s discretionary investment manager, said: “These high-yielding assets let on long-term leases to a strong covenant are a great addition to our portfolio. Retail warehouses continue to demonstrate their relevance and appeal alongside the continued rise of e-commerce, with one out of three sofas sold in the UK purchased in-store, while the ‘halo’ effect of a physical store supporting local online purchases is particularly strong for furniture.”
The UK REIT, which focuses on smaller lot sizes, funded the deal from its existing debt resources, increasing net gearing to 23.4% LTV.
The acquisition has increased the 164-property portfolio’s retail warehouse holding to 24%, with 38% industrial, 16% office, 11% high street retail and 11% other.
Shepherd-Cross added: “The attractive entry yield will be accretive to dividend capacity over the medium term. As bricks-and-mortar retail undergoes a renaissance, and retail parks continue to outperform, we anticipate future market rental growth, which should mitigate some of the acknowledged over-rent, support valuations and protect long-term income streams.”
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