Custodian REIT , the property investment company chaired by Scotsman David Hunter, has bought a portfolio of warehouses used for the distribution of books, magazines and periodicals for £24.65 million.
The deal is a sale and leaseback transaction with Menzies Distribution Limited (MDL), one of the UK's leading print media logistics companies, servicing 1,700 routes per day from 55 sites across the UK and Ireland. The portfolio comprises eight 'last mile' distribution units in Aberdeen, Edinburgh, Glasgow, Ipswich, Norwich, Stockton on Tees, Swansea and Weybridge. with rent of £1.61 million, reflecting a net initial yield of 6.4%.
Custodian, which has investments in Edinburgh, Glasgow, Perth and Kilmarnock, already owns an air cargo terminal at Glasgow International Airport, leased by DHL. Hunter, a former president of the British Property Federation and managing director of Aberdeen Asset Management’s property fund business, was actively involved in the introduction of real-estate investment trusts (REITs) to the UK.
The company purchasing the entire issued share capital of John Menzies Property 4 Limited which all eight properties, let on new 10 year leases with only one unit having a second-year break option. The leases provide for a 13.1% fixed rental uplift at year five.
The acquisition was funded using the company's existing debt facilities, increasing the company's borrowings to 23.2% loan-to-value. MDL will become Custodian REIT's largest tenant at 3.9% of the rent roll.
Richard Shepherd-Cross, managing director of Custodian Capital, said: "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."
Menzies Distribution chief executive Greg Michael said: "Since our acquisition by private equity firm Endless LLP in September 2018, the company has invested heavily into the retail logistics and parcel delivery markets. In July 2019 the company opened its new 170,000 sqft super-hub in Coventry which, together with its existing 55 depots, has given Menzies Distribution a market leading national footprint, covering from the highlands of Scotland through to its 100 strong electric vehicle fleet in central London.
"This transaction is a further positive step forward for Menzies Distribution, which will support and accelerate our continuing strategic and operational diversification over the coming months.”
