LXI swaps Travelodges for industrial sites – LXi REIT has, following an unsolicited approach, sold two of its older Travelodge hotels, in Haverhill and Ipswich, to an institutional buyer for £12.6m. This translates as a low exit yield of 5.0%, which compares favourably to the acquisition yields of 5.92% and 6.12% paid in March and July 2017, respectively. The price also represents a 19% uplift on acquisition cost and a 5% premium to the latest book value as at 30 September 2018. LXi generated a geared IRR of 23%.
LXi has acquired two industrial properties, by way of purchase and leaseback, for a combined purchase price of £11.7m, reflecting a 5.7% net initial yield (net of acquisition costs). The properties have been acquired with new, unbroken 25-year leases in place to West Midlands Travel Ltd, with a guarantee from its parent, National Express Group PLC, a FTSE 250 listed leading transport provider delivering services in the UK, Continental Europe, North Africa, North America and the Middle East, with a market capitalisation of approximately £1.9bn.
The new leases benefit from annual Retail Price Index linked rent reviews (collared at 2% per annum and capped at 4% per annum compound).
The properties comprise two purpose-built bus depots totalling 93,000 sq ft and 102,000 sq ft, with a range of accommodation including parking halls, workshops, vehicle inspection pits, refuelling areas, stores, bus wash areas and associated offices. The properties are located in the West Midlands: (i) in the southern Birmingham suburb of Yardley Wood, which lies 6.6 miles to the south of Birmingham city centre; and (ii) in West Bromwich, which lies 6.4 miles to the north west of Birmingham city centre.
LXi says that the properties are being acquired at a low capital cost and low rental base and benefit from strong alternative use values.
Forward funding acquisition of Aldi-anchored scheme, Evesham
In addition, LXi has exchanged contracts to provide forward funding for the pre-let development of an Aldi foodstore-anchored property in Evesham, Worcestershire for £12.15m, reflecting a 5.4% net initial yield (net of acquisition costs).
Anchoring the scheme will be a new 18,578 sq ft foodstore, which has been pre-let to Aldi Stores Limited, the principal UK trading company of the Aldi group, a leading global discount food retailer with 10,000 stores across 18 countries. The property will benefit from a new 15-year lease (with no tenant break right), with five yearly upward only RPI inflation-linked rent reviews.
The second unit, comprising 12,935 sq ft, has been pre-let to T. J. Morris Limited (trading as Home Bargains), a leading discount retailer of both food and non-food products, with over 400 stores throughout the UK. This has been pre-let on a new 15-year lease (with no tenant break right), with five yearly upward only open market rent reviews.
The final unit, comprising 10,000 sq ft, has been pre-let to TJX UK Limited (trading as TK Maxx), a leading discount fashion retailer and the principal UK trading company of The TJX Companies Inc., a New York Stock Exchange listed leading off-price apparel and home fashions retailer in the U.S. and worldwide with a market capitalisation of $54 billion. This unit has been pre-let on a new 15-year lease (with a tenant break right in year 10), with five yearly upward only open-market rent reviews. The property, which benefits from 196 parking spaces on a 3.9 acre site, lies one mile south of Evesham town centre and close to the main A46 bypass, providing good access to the national motorway system. Evesham is an affluent town situated in the heart of Worcestershire, approximately 14 miles south west of Stratford-upon-Avon, 16 miles north east of Cheltenham and 17 miles south east of Worcester.
Planning consent has been granted, the agreements for lease have exchanged and the company is forward funding the property on a fixed price basis. The company will receive an income from the developer during the construction period. The company is not developing the site or assuming development risk. The building works are due to complete in July 2019.
Scottish Widows loan – 2.99% per annum all-in fixed rate over 15-year term
A new 15-year £75m term loan with Scottish Widows Limited has now completed. The new loan has fixed the all-in rate at 2.99% per annum until maturity of the facility in December 2033. It takes the weighted average all-in debt cost to 2.94% per annum across all facilities; the weighted average debt maturity to over 12 years; and loan-to-value ratio to 30% (when fully drawn), below the maximum level of aggregate borrowings of 35% of gross assets.
LXi is in solicitors’ hands on a wide range of further acquisitions which will fully deploy the loan proceeds shortly.
Simon Lee, partner of LXi REIT Advisers Limited, commented: “We are pleased to have completed the disposal of two Travelodge hotels at a significant premium to acquisition cost and book value and to have immediately recycled the proceeds into two accretive industrial properties let to a strong tenant on 25 year, RPI-linked leases. Our new 15-year loan facility with Scottish Widows locks in a very attractive 2.99% all-in funding cost over the long term, reflecting the high quality and secure nature of our property portfolio. We continue to deploy the facility across a range of quality assets underpinned by long term leases, defensive sectors and robust tenants with accretive yields.”
LXI : LXI swaps Travelodges for industrial sites