Three landlord brothers have had a whopping £22 million pay day after selling their property portfolio to an investment trust.
Thurmaston, Leicester-based Merlin Properties Ltd offloaded the £19.4m portfolio of 28 “smaller lot-size regional UK investment properties” – mainly industrial sites, offices and shops in high streets and retail parks – to Custodian Property Income REIT.
The deal also includes £2.7m of newly built housing stock in the East Midlands which generates rent of £1.7m with a yield of 8% from 99% occupancy.
Hubert Lynch is founder director of Merlin Properties and runs the firm with brothers Richard and John. All three are directors of the company. The portfolio has been run from an industrial estate (main image) where another business connected to the Lynch family is also based.
“Operating the Merlin portfolio, which our family has compiled and managed over the last 40 years, has become increasingly demanding in today’s complex environment,” Lynch explains.
“We have undertaken the transaction in a tax efficient manner to ensure our family’s continued exposure to property investment both currently and for future generations through a professionally managed fund with a strong track record.”
Custodian Property Income made the purchase via an all-share acquisition and says its investment manager has already identified opportunities to drive further value from the portfolio to increase rental income from lease events and improve some of the properties’ environmental credentials.
Richard Shepherd-Cross, MD of Custodian Capital, says: “The transaction presented an attractive opportunity for the sellers to solve a family succession issue, defer crystallisation of a latent capital gain and obtain a more liquid investment, whilst maintaining the focus of their family wealth on regional real estate investments with attractive income characteristics.”
He adds: “We believe many other family property companies in the UK will face similar succession and tax issues and we hope to use the transaction as a blueprint for further opportunities to achieve scale in the current environment.”
The Merlin board will resign as directors once the sale is completed.
Picture credit: Google Streetview
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