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Custodian REIT acquires 10-property industrial portfolio, plans to issue equity

Custodian REITPlc said it paid £26.8 million to acquire a portfolio of 10 light-industrialproperties across the U.K. It also plans to issue new ordinary shares through aplacing for gross proceeds of up to £20 million.

The company acquired the portfolio through the purchase of theentire issued share capital of BLME (UK) GP Ltd. and LIBF (II) Sàrl, which arethe partners in BLME Light Industrial Building LP, an English limitedpartnership holding the portfolio. Custodian REIT used itsexisting cash and debt facilities to finance the transaction, increasing itsborrowings to 20.7% loan to value.

"The Portfolio wascompiled between 2011 and 2015 but is being sold due to the vendorrestructuring its funds business," Richard Shepherd-Cross, managing director of CustodianCapital Ltd., Custodian REIT's discretionary investment manager, said in arelease. He also noted that it complements the company's existing portfolio anddiversifies the tenant and location profile.

The acquired properties have a current passing rent of £2.2million, reflecting a net initial yield of 7.86%, with an expected reversionaryyield of 8.03%. The portfolio's weighted average unexpired lease term is 5.4years.

Regarding the share placement, Custodian REIT plans to issuethe new shares at a premium of 3.5% to the unaudited NAV per share as at Sept.30, with the issuance price to be published Oct. 14. Net proceeds are expectedto be used to repay a portion of the £22 million drawn Sept. 28 under thecompany's £35 million revolving credit facility. The remainder will be used tofund further commercial property acquisitions.

The company said it currently has £22.4 million of assetsunder offer and has seen a "steady flow" of opportunities followingBrexit. The company also expressed its continued confidence in the regionalproperty markets, which it said are not exhibiting any change in fundamentalsdriving rental growth.