LXi buys store portfolio – LXi REIT reports the acquisition of 11 foodstores and two discount stores from five different vendors/developers for a total cost of £61m. The stores have been acquired at an average net initial yield of 5.7% (net of acquisition costs) and with a strong and diversified tenant base in the form of Aldi, Lidl, Waitrose, Co-op, Iceland, B&M and The Range.
This helps redeploy the disposal proceeds of the BCA facility in Corby (which was sold on a 4.45% exit yield) and should boost the revenue account (for reference, the group’s latest portfolio valuation yield is 5.1%).
LXi says smaller sized foodstores are currently the primary focus for its grocery tenants, being right-sized for their preferred product range, but also offering online fulfilment through either or both of home delivery and click & collect. The stores are let or pre-let on long, index-linked or fixed uplift leases with low current rents (averaging £14 per sq ft) and low capital value pricing (averaging £230 per sq ft).
The whole portfolio now has a long WAULT to first break of 22 years, with 96% index-linked or fixed uplift rent reviews and is well diversified across the following robust sub-sectors: Industrial (21%), Budget Hotels (21%), Foodstores and Essentials (20%), Healthcare (13%), Car Parks (8%), Pubs (5%), Drive-thru Coffee (4%) and Other (8%).
Aldi foodstore forward funding, Northumberland
The company has exchanged contracts on the pre-let forward funding of an Aldi-anchored scheme in Berwick-upon-Tweed, Northumberland. The foodstore, which will extend to 19,000 sq ft, has been fully pre-let to Aldi Stores Limited (the principal UK trading company of the Aldi group) on an unbroken 20-year lease commencing on completion of the building works, with five-yearly RPI inflation-linked reviews. The starting rent is a low £16 per sq ft.
The adjoining 10,000 sq ft unit has been fully pre-let to Iceland Foods Limited, trading as Food Warehouse (the principal trading company of the Iceland Foods group) on an unbroken 10-year lease, with upwards only rent reviews and a low starting rent of £16.40 per sq ft.
Lidl foodstore, Hampshire
The company has acquired a 26,800 sq ft foodstore in Portsmouth, Hampshire. The property, which was purpose built for the tenant in 2017 and trades strongly, is fully let to Lidl UK GMBH (the principal UK trading company of the Lidl group), with 22 years until expiry and 17 years until first break.
The rent is reviewed on a five-yearly basis at a fixed growth rate of 2% per annum compounded. At the next rent review, which will take place in two years’ time, the rent will still be at a very low rate of £12 per sq ft.
Waitrose foodstore, Cheshire
The company has acquired a 25,000 sq ft foodstore in Poynton, Cheshire. The property, which was purpose built for the tenant in 2010 and trades strongly, is fully let to Waitrose Limited (the principal trading company of the Waitrose group), with 15 years unexpired until first break.
The rent is reviewed on a five-yearly basis at a fixed growth rate of 2.5% per annum compounded. The store is the dominant foodstore in its locality, which draws on an affluent catchment population, and benefits from a material online delivery capability.
Co-Op portfolio
The company has acquired a portfolio of seven Co-Op foodstores in Blackpool, Glasgow, Pontypridd, Sandbach, Southport, Wallasey and Wrexham, from a mortgagee.
Each property is let to the Co-Operative Group Limited (the principal company of the Co-op group) with over 16 years unexpired to first break and with annual rental uplifts fixed at 2.25% per annum.
The portfolio benefits from a low average rent of £15.80 per sq ft and a liquid average lot size of 12,000 sq ft. The properties also have the advantage of a high number of parking spaces, averaging 51 per store, which help ensure a good customer experience with quick and easy access to the store as well as assisting the tenant in their provision of additional services and sales channels such as click & collect.
B&M and The Range, Yorkshire
The company has acquired two discount stores, comprising 72,000 sq ft in Bradford, Yorkshire, which were purpose built for the tenants in 2019. The first unit is fully let to The Range (through its principal UK trading company, CDS (Superstores International) Limited), with 19 years until first break and fixed rental uplifts of 2.5% per annum compounded.
The second unit is fully let to B&M Retail Limited (the principal trading company of the FTSE 100 listed B&M group), with 14 years until first break and fixed rental uplifts of 2% per annum compounded.
The current average rent on the two units is an exceptionally low £7 per sq ft.