Custodian Reit (LON:CREI) said it spent £8.9mln on acquiring two retail warehouses let to DFS Furniture and with an aggregate passing rent of £894,103 per year, reflecting a net initial yield of 9.43%.
One warehouse is in Measham, Leicestershire, and the other is in Droitwich, Worcestershire, occupying an aggregate 40,077 sq ft.
“The attractive entry yield will be accretive to dividend capacity over the medium term,” said Richard Shepherd-Cross, managing director of the company’s manager, Custodian Capital Ltd.
“As bricks and mortar retail undergoes a renaissance, and retail parks continue to outperform, we anticipate future market rental growth which should mitigate some of the acknowledged over-rent, support valuations and protect long term income streams.”
The purchases were funded from existing debt resources, which has increased net gearing to 23.4% loan-to-value, which is within the company’s target range.
Retail warehouses now represent a 24% weighting in the 164-property portfolio, with 38% industrial, 16% office, 11% high street retail and 11% other.
Shepherd-Cross said: “Retail warehouses continue to demonstrate their relevance and appeal alongside the continued rise of e-commerce, with one out of three sofas sold in the UK purchased in-store, while the ‘halo’ effect of a physical store supporting local online purchases is particularly strong for furniture.”