Custodian Property Acquires £22.1 Million Portfolio Through Strategic Merlin Deal
LONDON, – In a move that reflects both strategic precision and market adaptability, Custodian Property Income REIT PLC has acquired a £22.1 million regional property portfolio through the purchase of family-owned Merlin Properties Ltd. The deal, structured as an all-share transaction, is designed to enhance income, diversify holdings, and scale Custodian’s operations without relying on conventional capital markets.
The Leicester-based real estate investment trust confirmed that the acquisition comprises £19.4 million worth of investment properties spread across 28 smaller lot-size assets, alongside £2.7 million in recently developed housing stock, the sale of which is expected to complete in the coming months.
High-Yield, High-Occupancy Assets
The acquired portfolio is concentrated in the East Midlands, featuring an average lot size of £700,000 aligning with Custodian’s ongoing focus on accessible, income-generating regional properties. The assets are 99% let, producing an annual passing rent of approximately £1.7 million, equating to a net initial yield of around 8.1%.
A key highlight is the portfolio’s sectoral composition, with 46% of income derived from industrial assets, complementing Custodian’s existing industrial tilt. The remainder is diversified across office and retail properties, strengthening the trust’s sectoral balance and tenant mix.
All-Share Transaction Unlocks Growth Potential
To finance the deal, Custodian will issue 22.9 million new shares to Merlin shareholders, with an additional 1.7 million shares anticipated upon final completion. The consideration based on adjusted net asset values represents approximately 5.6% of Custodian’s current issued share capital.
The structure of the acquisition reflects a deliberate strategy to grow through corporate and portfolio acquisitions, particularly in a market where traditional capital raising remains constrained.
“We have been clear that a key element of our strategy is to scale the business through corporate and/or portfolio acquisitions,” said Richard Shepherd-Cross, Managing Director of Custodian Capital, the REIT’s investment manager. “This strategic transaction via an all-share acquisition allows us to circumnavigate capital market limitations and continue to grow.”
Operational Continuity and Integration
Following completion of the transaction, the Merlin board will step down, and Rob Field, Merlin’s long-serving Property Manager, will transition to Custodian Capital Ltd. This move ensures operational continuity and retains valuable regional knowledge within the expanded team.
Shepherd-Cross added that the transaction not only supports earnings per share accretion and net gearing reduction, but also enhances Custodian’s income profile while remaining closely aligned with its established investment strategy.
Outlook and Market Reaction
Shares in Custodian Property were trading down 1.2% at 82.00 pence in London on Monday morning, though the stock remained up 11% over the past 12 months, a performance that reflects growing investor confidence in the trust’s regional, income-led approach.
The Merlin acquisition reaffirms Custodian’s positioning as a disciplined buyer in a cautious market. With this latest move, the company is signalling a clear intent to grow efficiently and opportunistically, one well-aligned with long-term shareholder value.
About Custodian Property Income REIT
Custodian Property Income REIT PLC is a UK-based real estate investment trust focused on delivering income-led returns through a diversified portfolio of regional commercial properties. The company targets smaller lot-size assets across the industrial, retail, and office sectors, with an emphasis on high occupancy and long-term income resilience.
