LXI REIT makes several acquisitions following £200m equity issue

LXI REIT announced a number of acquisitions for a combined total of £135m on Tuesday, reflecting a weighted average net initial yield of 5.7%, following the £200m equity issue it reported on 13 June.

The London-listed firm said the acquisitions, which had been made individually from separate vendors and developers and included both pre-let forward fundings and built assets, comprised a number of long-let and index-linked assets.

It said it was also in legals on a number of additional assets to deploy the balance of the proceeds of the capital raise, with further acquisition announcements expected to be made in the near future.

The first acquisition was the pre-let forward funding of a new Aldi-led scheme in St Albans, Hertfordshire.

LXI said the food store had been pre-let to Aldi Stores - the principal UK trading company of the Aldi group - on a new, unbroken 25-year lease with five-yearly rental uplifts fixed at 2% per annum compounded.

“Aldi is a leading discount supermarket, operating 10,000 food stores across 20 countries,” the LXI board explained.

Secondly, it announced the forward funding of a new 78-bedroom Travelodge hotel and Costa Coffee shop in Workington, Cumbria.

The hotel had been pre-let on a new, unbroken 25-year lease to Travelodge Hotels - the principal trading company of the Travelodge group.

Meanwhile, the coffee shop had been pre-let to Costa - the principal trading company of the Costa Coffee group - on a new, unbroken 15-year lease.

Both leases benefitted from five-yearly rent reviews index-linked to the retail price index.

“Travelodge is a leading budget hotel operator, with over 40,000 bedrooms across more than 560 hotels in the UK, Ireland and Spain,” the board explained.

“Costa is the UK's largest and the world's second largest coffee shop chain with over 2,100 UK outlets and more than 1,280 in 31 overseas markets.

“The Coca-Cola Company completed the acquisition of Costa Limited in early 2019.”

The company said it was not developing the Aldi or Travelodge sites, or assuming development risk, and was forward funding each property on a fixed price basis.

LXI said it would receive an income from the developers during the construction period.

The firm’s third acquisition was, on a sale and leaseback basis, seven Q-Park car parks in “strong” city centre locations in London, Edinburgh, Glasgow, York, Manchester and Sheffield.

Each property had been leased back to Q-Park, with a guarantee from its Dutch-based parent Q-Park N.V., on new, unbroken, 35-year leases, with annual rent reviews index-linked to the retail price index.

“Q-Park is one of Europe's leading car park operators, with over 880,000 parking spaces across 6,700 car parks in 10 European countries,” LXI said.

Fourthly, the company acquired a 91,000 square foot distribution facility on a 10-acre site in Cannock, Staffordshire, a strong West Midlands logistics location.

The property benefitted from a new, unbroken 20-year lease to Eddie Stobart, with a guarantee from its parent ESLL Group, with five-yearly rent reviews index-linked to the retail price index.

“Eddie Stobart is a leading provider of end-to-end logistics services, including road transport, supply chain management, warehousing and distribution services,” the board said.

The fifth acquisition was of 14 family-oriented, food-led public houses in Cheshire, Manchester, Lancashire, Yorkshire, Staffordshire, Newcastle and County Durham.

Each property had been let to Greene King, with 15-year unexpired and unbroken lease terms, with annual rent reviews to a fixed uplift of 2.5% per annum compounded.

“Greene King, an investment rated constituent of the FTSE 250 index with a market cap of approximately £1.9bn, is the UK's leading pub retailer and brewer with over 2,900 pubs, restaurants and hotels across the UK,” the board explained.

Finally, LXI had acquired, on a sale-and-leaseback basis, a garden centre in Pennine, West Yorkshire.

The property had been leased back to Dobbies Garden Centres, with a guarantee from its parent Dobbies Garden Centres Group on a new, unbroken 30-year lease, with annual rent reviews index-linked to the retail price index.

LXI described Dobbies as a 150-year old, market-leading garden centre owner and operator.

“We are pleased to have swiftly and carefully deployed £135m of the net proceeds of our recent £200m capital raise in secure, long-let and index-linked assets,” said John White, partner of LXI REIT Advisors.

“We look forward to investing the balance in short order from our advanced pipeline of additional assets, which are expected to deliver further value for our shareholders.”