LXi REIT has acquired three long-let property assets for a total of £80m, reflecting an accretive 5.25% average net initial yield, as it deploys the proceeds of its £100m equity raise in July.
The three assets – a biotech campus in York, TV studios in Glasgow and a recycling facility in Aberdeen – have a long weighted average unexpired lease term (WAULT) to first break of 23 years and inflation-linked rental uplifts.
The company said it had several over deals in solicitors’ hands including pre-let forward fundings and sale and leasebacks, which would deploy the balance of the net equity proceeds of the placing.
Life Science and Biotech campus, York
The company has acquired a Life Science and Biotech campus in York (pictured), which extends to 382,000 sq ft across 82 acres. The campus is fully let to Capita plc on a long lease with 25 years unexpired until first break. The rent increases on a five-yearly basis in line with RPI inflation (capped at 3.5% per annum).
Three-quarters of the underlying income at the campus is derived from UK Government agencies (including the Department for Environment, Food & Rural Affairs (DEFRA), Public Health England (PHE) and The Animal and Plant Health Agency), with the remainder derived from high-growth SMEs. The group said the campus has acted as a national response site for the government and has performed a key function during various public health crises, including COVID.
The current rent is £7.50 per sq ft and is highly reversionary relative to the estimated rental value (ERV) of the property of £13.50 per sq ft.
The asset also has expansion space that could provide opportunities for the company to further enhance the value of the asset through the pre-let forward funding of additional buildings.
Media studios and HQ, Glasgow
The company has acquired, through an off-market transaction, STV’s media studios and HQ facility in Pacific Quay, Glasgow. The media facility, which was purpose-built for STV, comprises 63,000 sq ft over four floors and contains all of STV’s live news studios, along with editing and data storage and processing facilities.
It is leased on a new, unbroken 20-year lease to STV plc and the current rent reflects £16.25 per sq ft, which is highly reversionary. Grade A office rent in Glasgow is currently around £35 per sq ft. The rent, during the lease term, increases five yearly at a fixed rate of 1.5% per annum.
The facility is located on the south side of the Clyde at Pacific Quay, which has become Glasgow’s media and tech hub and is also home to BBC Scotland. Barclays have recently agreed to occupy 300,000 sq ft at Buchanan Wharf, which is to the east of the site. Over the adjacent bridge are the SSE Hydro, SEC Centre and SEC Armadillo, which are Scotland’s leading events venues.
Recycling facility, Aberdeen
The company has acquired a waste recycling and storage facility in Aberdeen, let to Biffa plc on a long lease with 14 years unexpired to first break. The rent increases on an annual basis in line with CPI inflation, with a collar of 2% per annum and a cap of 4% per annum.
The recycling facility is located two miles south of Aberdeen city centre and is Biffa’s only waste transfer site in Aberdeen. LXi has commenced discussions with the tenant to increase the length of the lease.
Disposal of Lidl Foodstore, Chard
LXi has also sold its Lidl foodstore in Chard, Somerset for £7.8m, reflecting a low exit yield of 3.8%, after receiving an unsolicited approach.
The sale price reflects a material premium of 38% to the acquisition price paid by the company in 2017 and generates an attractive geared IRR of 26% per annum. The company acquired the property as a forward funding, at a 5.5% net initial yield.