UK real estate investment trust Custodian REIT has sold an industrial unit in Milton Keynes for £8.5 million at a 73% premium to its 31 March 2022 valuation.
Custodian REIT acquired the 44,187 sq ft warehouse and distribution unit in January 2015 for £2.1 million and subsequently invested a further £0.9 million to fully refurbish the property.
This refurbishment included re-cladding the exterior, replacing the roof, restoring the yard and renovating the interior which in aggregate improved the property’s energy performance certificate (EPC) rating from ‘E’ to ‘C’.
”As a result the property was let at a higher rent to Saint Gobain Building Distribution for five years before a tenant break option was exercised in December 2021. The sale of the unit to a special purchaser was then negotiated which required the property with vacant possession,” said the REIT.
This disposal decreases the industrial weighting by valuation within the Company’s highly diversified portfolio of 164 properties to 47%, with the balance comprising 21% retail warehouse, 13% office, 12% other and 7% high street retail, all of which are in strong economic areas across the UK.
Commenting on the disposal, Richard Shepherd-Cross, Managing Director of Custodian Capital Limited (the Company’s external fund manager), said: “We acquired this property having clearly identified an opportunity to create value by investing in the asset and bringing it up to modern standards. As a result we were able to let the property promptly and generate a healthy and growing level of income during our seven years of ownership. When the tenant exercised its break option we took the opportunistic decision to dispose of the property to a special purchaser. This sale has allowed us to crystallise a significant profit for shareholders and further demonstrates the benefits of a smaller regional property strategy, where in certain circumstances the vacant possession value fully supports and sometimes exceeds the investment value.”
