Family-owned property portfolio acquired by real estate investment trust

Custodian Property Income made the investment with a view to expand its income return through a diversified portfolio of smaller, regional properties across the UK.

Merlin’s portfolio comprises 28 smaller lot-size regional UK investment properties worth £19.4 million, alongside £2.7 million of newly built housing stock, the ongoing sale of which is expected to conclude in the next few months.

Lots are primarily located in the East Midlands, with 46 per cent weighted by income towards the industrial sector, in line with the company’s existing portfolio.

The remaining income is spread evenly between offices and retail properties, both high street and edge of town retail parks.

Custodian Property Income acquires the entire issued share capital of Merlin through the 22.9 million new shares in the company.  A further 1.7 million new shares are expected to be issued on finalisation of completed accounts within the next six months.

Merlin’s board of directors will resign as part of the sale, with only its property manager, Rob Field, joining the Custodian Capital team.

Richard Shepherd-Cross, managing director at Custodian Capital, the company’s investment manager, said: “We have been clear that a key element of our strategy is to seek opportunities to scale the business through corporate and/or portfolio acquisitions.

“In an environment where current market conditions make further capital raisings through the stock market challenging, this strategic transaction via an all-share acquisition on an adjusted NAV-for-NAV basis allows us to circumnavigate that issue and continue to grow.”

It follows a bid by Custodian Property Income for Abrdn Property Income, which failed to gain the required 75 per cent support of API shares last year, and saw fund manager, Abrdn retaining the £300 million portfolio in a managed wind-down estimated to last around two years.

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