Disposals ahead of value drive growth for LXi REIT

LXi REIT reported a 1.1% improvement in EPRA net tangible assets and net asset value per share under IFRS in its annual results on Wednesday, to 125.7p, with growth primarily driven by disposals ahead of book value as well as like-for-like portfolio growth.

The FTSE 250 real estate investment trust said its total net asset value return for the year ended 31 March was 5.6%, comprising net asset value growth and dividends paid during the year.

Its average annual total net asset value return stood at 10.1% per annum in the four years since its initial public offering, well ahead of its 8% medium term target.

LXi’s portfolio was independently valued at £938.4m, as individual subsectors experienced varying performance, with foodstores and essential retail showing positive like-for-like change of 10.0% during the year, and industrial assets showing positive like-for-like growth of 11.0%.

Hotels showed a negative like-for-like change of 12.4% during the year, while car parks were down 5.7% and pubs shrank by 17.7%.

Healthcare assets showed a positive like-for-like change of 6.3% over the 12 months, and drive-thru coffee was in the green, growing by 0.9%.

The company’s loan-to-value ratio ended the period at 23%, with “significant” headroom to its medium-term borrowing policy cap of 35% and banking covenant of 50%.

Following the extension and full deployment of the revolving credit facility, LXi said its loan-to-value was expected to return to 30%.

The board said the dividends paid and proposed for the year came to 5.55p per share, which was down 3.5% on the prior year as a result of the impact of the Covid-19 pandemic on its income.

Dividends were fully covered by the group's adjusted earnings per share of 7.5p, which was up from 6.3p year-on-year, and adjusted cash earnings per share for the year of 5.5p, compared to 5.2p in the prior year.

Gross equity proceeds of £125m were raised via an oversubscribed equity raise in the period, with the proceeds deployed into a pre-identified pipeline of accretive assets that the directors said would further strengthen the group's portfolio.

“Against the backdrop of the Covid-19 pandemic, the defensive characteristics of our highly diversified portfolio and exposures to essential sub-sectors with structural support, have allowed us to continue to deliver attractive income returns and growth, in a period of major uncertainty,” said chairman Stephen Hubbard.

“Having collected virtually all of the rents due since the first half of the year, I was pleased to announce annual dividend guidance of 6p per share for the financial year that commenced on 1 April, representing 4.3% growth on the company's pre-Covid-19 dividend level, well ahead of inflation.”

Hubbard said the company was “delighted” by the success of the £125m equity raise in March.

“The proceeds of this fundraise have allowed us to capitalise in short order on a pre-identified pipeline of assets diversified across a range of defensive and structurally supported sub-sectors and let to high-quality tenant covenants.

“The majority of these deals completed after the year-end and provide the potential for accretive value growth, especially in the forward fundings, whilst further strengthening our portfolio.”

At 0839 BST, shares in LXi REIT were up 2.5% at 139.4p.