Custodian REIT has announced plans to raise £20m of new equity to fund acquisitions in the regions.
The company is in the process of acquiring several assets funded using debt. It has committed £2.5m on a pre-let development funding and has £6.5mof properties under offer, which are likely to complete within the next two weeks.
The acquisitions will increase Custodian REIT’s loan to value (LTV) to 18.2% (£35m), which still below its target gearing of 25% LTV.
The company said it was raising money to take advantage of the strong acquisition opportunities created by other investors who are selling off their smaller holdings to focus on assets worth more than £10m.
“The company has targeted these high quality, regional property assets of lot size below £7.5m and has benefitted from a significant net initial yield advantage accordingly,” it said.
Custodian REIT said it expected this strategy to continue well into 2015.
Since its IPO last March and first subsequent equity raise in October, the company has invested £87.5 million at an average net initial yield of 7.5%.
Its target dividend is 5.25p per share in the year ending 31 March 2015 and 6.25 pence per share in subsequent years. The shares currently trade at 106p.
The share issue is expected to close at 12.00pm on 12 February 2015 and the issue price is 104p, a 2p discount on yesterday’s closing price.