Custodian Property Income (CREI) continues its expansion through family office portfolios, snapping up a majority stake Scorpion Properties for £8.5m.

The £627m real estate investment trust (Reit) has made its second acquisition in as many months and its third this financial year as it continue its pivot into family offices following the failed merger with Aberdeen Property Income (API) last year.

The portfolio of small regional properties is adding Scorpion’s five single-led industrial properties with 100% occupancy to its roster. This includes four vehicle accident repair centres let to one of the UK’s leading auto repair businesses Steer Automotive, and one unit let to the UK’s largest car-part distributor Euro Car Parts.

The properties have an average lot size of £1.7m and are located in the South Midlands along the M40 corridor. Annual aggregate rents total £600,000, adding 1.3% to the Reit’s annual rent roll.

CREI believes there is ‘significant value creation potential’ in the portfolio, and expects to capture 43% latent rental growth at review that would increase rents to £847,000 a year.

The latest acquisition follows hot on the heels of the £36m purchase of Grove Court Properties, which was made up of seven properties located in the eastern outskirts of London by the M25 motorway.

Richard Shepherd-Cross, managing director of Custodian Capital, said the blueprint for buying family businesses was laid out last year with the purchase of family-owned Merlin portfolio for £22m.

He said the Scorpion deal ‘provides further evidence of the solution we offer to family offices seeking to exit or simplify the ownership structure of their property holdings’.

Shepherd-Cross said targeting family-owned portfolios ensures the portfolio maintains its focus on ‘high-quality, smaller-lot size investments, which offer an attractive yield premium over larger assets, with little or no more associated risk’.

He plans to progress the pipeline of similar assets in line with its growth plans and ‘commitment to generating shareholder value through disciplined consolidation’.

‘The listed Reit structure offers a tax efficient solution for the sellers, extinguishing the latest chargeable gains and potentially deferring the crystallisation of a latent capital gain, while obtaining a more liquid and easily tradeable investment,’ said Shepherd-Cross.

The pivot in strategy has been beneficial to CREI’s share price, which is up 31.8% over the past year, beating the 18.6% increase in the average trust in its Property – UK Commercial sector.

The net asset value (NAV) of the fund has only risen 5.3% over the past year, but still beat the 1.7% gain from the average peer. The shares currently trade at a 9.4% discount to NAV.