Custodian REIT has sold its only shopping centre, offloading the largest asset that it acquired through last year’s takeover of Drum Income Plus REIT.
The company has sold Gosforth Shopping Centre in Newcastle to a local private buyer for £9.3m. That price marks a 3.5% premium to the £8.9m apportioned value of the asset when Custodian bought Drum Income Plus in November 2021 – but also equals the price the property changed hands for almost two decades ago.
The 73,367 sq ft centre, which accounted for a fifth of Drum Income Plus REIT’s portfolio by value, comprises 18 shops, anchored by a 33,000 sq ft Sainsbury’s superstore. Other tenants include Boots, Lloyds, Costa and WH Smith. It has produced £900,000 of rental income under Custodian’s ownership. The REIT has lifted its rent roll by £78,000, or 8.5%, and boosted occupancy to 95.7% from 93.6%.
Drum Income Plus REIT acquired the property for £12.2m in 2015. Prior to that, it had been sold by Tyne & Wear Pension Fund for £9.3m back in 2004, according to Radius Data Exchange records.
In Drum Income Plus’s final standalone financial report before the takeover – covering the half year to 31 March 2021 – the company said the value of the centre “has been reduced due to the market sentiment and lack of transactional evidence for shopping centres”. At the halfway point of that year it was valued at £10m.
Richard Shepherd-Cross, managing director at Custodian Capital, the REIT’s external fund manager, said: “Shopping centres as a sector have not performed well since the Covid-19 pandemic and do not fit comfortably within our investment objectives of selecting high quality, well-located regional properties in areas where future rental growth is underpinned by strong supply/demand fundamentals.
“The asset management work completed since acquisition and the accretive terms of the Drum Income Plus REIT purchase have allowed us to achieve a profitable sale despite current market uncertainty. This disposal provides additional capital for our programme of improving assets we feel will better capture tenant demand over the long term, as well as enhancing their environmental credentials.”
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