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LXi REIT completes six acquisitions and fully deploys proceeds from £200m capital raise

LXi REIT (LXI) has announced that it has completed six, long-let, index-linked acquisitions from separate developers and vendors. The combined total investment of approximately £55m reflects a weighted average net initial acquisition yield of 5.83% (net of acquisition costs). Following these purchases (and those it previously announced on 25 June 2019), the company says that it has fully deployed the net proceeds of the Company’s £200 million equity issue announced on 13 June 2019. The weighted average net initial acquisition yield of 5.74%, which compares favourably to the Company’s latest valuation yield of 5.13% as at 31 March 2019. The acquisitions include three forward fundings. For these, the Company is not developing the sites or assuming development risk and is forward funding each property on a fixed price basis. The Company will receive an income from the developers during the construction periods. The six purchases are as detailed below.

Lidl foodstore forward funding, Cornwall

The Company has acquired, by way of a pre-let forward funding, a new Lidl-led scheme in Camborne, Cornwall. The foodstore has been pre-let to Lidl UK GmbH, on a new 25-year lease (with a tenant break right at year 15) from completion of the building works, with five yearly rental uplifts in line with the Retail Prices Index. Lidl UK GmbH is the principal UK trading company of Schwarz Gruppe GmbH, a top four global retail group that owns and operates the Lidl and Kaufland brands, operating over 11,800 stores across 30 countries.

Lidl foodstore forward funding, Greater Manchester

The Company has acquired, by way of a pre-let forward funding, a new Lidl-led scheme in Hattersley, Greater Manchester. The foodstore has been pre-let to Lidl UK GmbH, on a new 25-year lease (with a tenant break right at year 15) from completion of the building works, with five yearly rental uplifts in line with the Retail Prices Index.

Premier Inn hotel forward funding, Scottish Highlands

The Company has acquired, by way of a pre-let forward funding, a new Premier Inn hotel in Pitlochry, in the Scottish Highlands. The hotel has been pre-let to Premier Inn Hotels Limited, with a guarantee from its parent Whitbread Group plc, on a new 25-year lease (with a tenant break right at year 20) from completion of the building works, with five yearly rental uplifts in line with the Consumer Prices Index. Premier Inn is the UK’s largest hotel brand, operating over 72,000 rooms across 785 hotels, and is part of Whitbread PLC, the UK’s largest operator of hotels and restaurants, with a market capitalisation of approximately £8 billion.

Care home, Midlands

The Company has acquired a care home in the Midlands, which is fully let to Bupa Care Homes (ANS) Limited and guaranteed by its parent Bupa Care Homes (CFG) plc, on a long lease with over 23 years unexpired to first break and benefits from annual rent reviews increasing in line with the Retail Prices Index. The tenant and guarantor are part of the Bupa group, the leading investment grade international healthcare company.

Waste management facility, Poole

The Company has acquired a new waste management facility in Poole, Dorset, which is fully let to Veolia ES (UK) Limited on a new 25-year lease (with a tenant break right at year 20), with five yearly rental uplifts in line with the Retail Prices Index. Veolia ES (UK) Limited is the principal UK trading company of Veolia Environnement SA, the global leader in water, waste and energy management solutions and listed on Paris Euronext with a market capitalisation of approximately €12 billion.

PGL activity centre, Lancaster

The Company has acquired, on a sale and leaseback basis, a PGL outdoor acitivity centre in Lancaster, Lancashire. The property, which benefits from a 48 acre plot and 308 beds, has been leased back to PGL Travel Limited, with a guarantee from its parent HB Education Limited, on a new, unbroken 35-year lease, with annual rent reviews index-linked to the Retail Prices Index. HB Education is Europe’s leading outdoor education and study group, providing residential adventure and study trips for schools and youth organisations through the PGL brand, as well as educational tours for schools and further or higher education students through its NST, EST, Studylink and Travelplus brands.

Portfolio update

Following these Acquisitions, the Company says that its portfolio is currently positioned as follows:

  • attractive average net initial acquisition yield of 5.8% (versus latest portfolio valuation yield of 5.13%);
  • 100% let or pre-let;
  • long weighted average unexpired lease term to first break of 22 years;
  • 97% of rental income benefits from index-linked or fixed uplift reviews, comprising: 63% RPI, 20% CPI and 14% fixed uplifts; and
  • highly diversified across 44 robust tenants and 10 sectors, the largest being: hotels 23%, industrial 21%, healthcare 17%, leisure 14%, discount foodstores 13% and car parks 7%.

Comments from Simon Lee, partner of LXI REIT Advisors Limited

“We are pleased to have deployed fully, swiftly and prudently the net proceeds of the Company’s recent £200 million capital raise, announced on 13 June 2019, in attractively-priced, secure and index-linked assets that are diversified by strong tenant covenants across robust property sectors, which we anticipate will deliver further value for our shareholders.”

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