LXi gets coffee fix – LXi REIT has exchanged contracts to provide forward funding for the pre-let development of a portfolio of 13 separate Starbucks and Costa drive-thru format coffee shops for a combined consideration of GBP23.4 million, reflecting a 5.7% net initial yield (net of acquisition costs). The acquisitions are being funded with their new loan from Scottish Widows.
12 of the properties have been pre-let to Starbucks Coffee Company (UK) Limited and one has been pre-let to Costa Limited, each on unbroken leases of 15 years from completion of the building works, with five yearly rent reviews index-linked to RPI inflation (collared at 1% per annum and capped at 4% per annum compound).
Starbucks Coffee Company (UK) Limited is the principal UK trading company of the Starbucks Corporation, the leading coffee retailer which operates over 29,000 stores globally and is listed on the NASDAQ stock exchange with a market capitalisation of $87 billion.
Costa Limited is the principal UK trading company of the Costa Coffee group, the UK’s largest and the world’s second largest coffee shop chain with over 2,000 UK outlets and more than 1,240 in 31 overseas markets. The group was acquired by The Coca-Cola Company in January 2019 for GBP3.9 billion.
Each property will comprise a new drive-thru format coffee shop and the sites are well located across Great Britain in Barry, Blackpool, Cambourne, Canvey Island, Cardiff, Carmarthen, Newcastle Under Lyme, Northampton, Nottingham, Peterborough, Preston, Redditch and Stoke. LXi is not developing the sites or assuming development risk and is forward funding each property on a fixed price basis. The building works are due to complete in the third quarter of this year. LXi will receive an income from the developer during the construction period.
Simon Lee, partner of LXI REIT Advisors Limited, commented: “This transaction provides our investors with rare access to the strong Starbucks and Costa covenants in scale and the individually granular lot sizes, forward funding structure and off-market nature of the purchase have delivered a highly attractive yield, coupled with RPI-linked rental uplifts and capital growth potential.”
LXI : LXi gets coffee fix