LXi makes three acquisitions, sells Lidl store

Specialist property investor LXi announced a number of accretive acquisitions for a total cost of £80m on Friday, reflecting an accretive 5.25% average net initial yield, compared to a current portfolio value of 4.7%.

The FTSE 250 real estate investment trust said the acquisitions benefited from a long weighted average unexpired lease term (WAULT) to the first break of 23 years, “high-quality” tenants, “robust” sectors and inflation-linked rental uplifts.

It came after its £100m placing in July.

The company said it was also in solicitors' hands on a range of pre-let forward fundings and sale and leasebacks, which would deploy the net balance of the placing.

It said the first acquisition was a “substantial” life science and biotechnology campus in York, consisting of 382,000 square feet of specialist facilities across 82 acres.

The campus is the place of work for 1,000 people, with a particular specialism in agri-tech, food biotechnology, environmental, medical, healthcare and diagnostic work.

As a secure site with “highly specialist” facilities, the campus has acted as a national response site for the UK government, and performed a key function during various public health crises, including Covid-19.

It is fully let to outsourcing giant Capita on a long lease, with 25 years unexpired until first break.

The rent increases on a five-yearly basis in line with retail prices index (RPI) inflation, capped at 3.5% power annum, with the current rent a “very low” £7.50 per square foot, highly reversionary relative to the estimated rental value of around £13.50 per square foot.

Secondly, LXi said it acquired, through an off-market transaction, the media studios and headquarters facility of Scottish broadcaster STV in Glasgow’s Pacific Quay.

The facility, which was purpose-built for STV, comprises 63,000 square feet over four floors, along with 150 car parking spaces.

It was described as “mission critical” for STV's business, containing all of its live news studios, along with editing and data storage and processing facilities.

The facility benefits from a new, unbroken 20-year lease to STV, with the current rent reflecting a low £16.25 per square foot, which was also “highly reversionary”.

Grade A office rent in Glasgow was currently around £35 per square foot, with the rent at STV during the lease term increasing five-yearly at a fixed rate of 1.5% per annum.

Finally, the company acquired a waste recycling and storage facility in Aberdeen, let to Biffa on a long lease with 14 years unexpired to first break.

The rent increases on an annual basis in line with consumer prices index (CPI) inflation, with a collar of 2% and a cap of 4% per annum.

LXi said the facility was Biffa's only waste transfer site in Aberdeen, adding that it had started discussions with the tenant to increase the length of the lease.

The firm also announced that, following an unsolicited approach, it had sold its Lidl supermarket in Chard, Somerset for £7.8m, reflecting a low exit yield of 3.8%.

It said the sale price reflected a material premium of 38% to the acquisition price it paid, and generated an “attractive” geared internal rate of return of 26% per annum.

The company acquired the property as a forward funding, at a 5.5% net initial yield, in 2017, and its latest book value was marked to the sale price as an asset held for sale.

“These transactions demonstrate the company's continuing ability to make accretive and secure long income investments across a wide range of structurally supported sub-sectors, including its first investment in the life science arena, as well as highly profitable disposals,” said Simon Lee, partner at LXi REIT Advisors.

At 0839 BST, shares in LXi REIT were up 0.28% at 143.8p.