LXi REIT swaps two care homes for a Stobart industrial facility – After an unsolicited approach, LXi has sold two care homes in Leicestershire let to Prime Life to a UK pension fund for £19.0 million. They say that this:
- reflects a low exit yield of 5.25%, which compares favourably to the acquisition yield of 6.50% paid in November 2017;
- represents a 17% premium to latest book value as at 31 March 2018; and
- generates an attractive geared IRR of 56% a year.
Industrial Acquisition
LXi REIT has also acquired the freehold interest in the new Stobart industrial facility and office headquarters currently under construction in Widnes, Cheshire in a sale and leaseback transaction.
The purchase price is £25.5 million, reflecting a net initial yield of 5.50% (net of acquisition costs) and was funded from the disposal proceeds referred to above and existing capital resources.
The property has been acquired on an off-market basis, with a new, unbroken 22.5 year lease in place to Stobart Group Ltd. Stobart Group is a FTSE 250 listed company and one of the UK’s leading infrastructure and support service businesses operating in the energy, aviation and rail sectors. The new lease, which has no tenant break right, benefits from Retail Price Index linked rent reviews (collared and capped at 1.5% per annum and 4.0% per annum compound) on a five-yearly basis, but the first review takes place after 2.5 years.
The property is a substantial and strategic industrial holding, extending to over 40 acres and will comprise:
- a new headquarters office for the Stobart Group of 23,000 sq ft;
- an existing 180,000 sq ft warehouse, used to store and process biomass timber waste; and
- 20 further acres of new, hard standing to store and process timber waste, along with HGV parking.
The office and hard standing elements are currently under construction. However, the company is not taking development risk and Stobart Group will be paying the full rent, and observing all other tenant obligations, from the date of acquisition.
The site is adjacent to the newly operational 28MW Widnes Biomass Plant, which is owned by Stobart Group and the UK Green Investment Bank. Stobart Group also benefits from a long-term contract to supply the plant with processed timber from the Property, further underlining the strategic importance of this site. Widnes benefits from good road communications, situated on the main A557 which connects the M62 motorway at Junction 7 to the north and Runcorn (via the Runcorn-Widnes Bridge) to the south. The M56 motorway is accessible south of Runcorn at Junction 12. The Mersey Multimodal Gateway is in Widnes, which provides a major new rail/road, freight handling and logistics park covering 180 hectares. In addition, Central Government is providing funding for the Mersey Gateway Project, a new six lane toll bridge across the river, which will improve access to the town from Runcorn and the south. Widnes is a submarket of the larger Warrington industrial market, which is well connected to the motorway network, near to the M62, M6 and M56, making it a key warehouse and distribution hub. The area has been transformed in recent years by Omega, which has delivered over 3.0 million sq ft of industrial space and attracted occupiers including ASDA, the Hut Group, Hermes and Travis Perkins.
Simon Lee, Partner of LXi REIT Advisors Limited, commented: “This disposal and acquisition reflect our strategy of selectively acquiring long, index-linked properties across sectors where we see value as well as profitably recycling our capital to deliver strong capital growth and secure inflation-linked income to our shareholders.”
LXI : LXi REIT swaps two care homes for a Stobart industrial facility