LXi buys a gym and a garden centre, sell off social housing

Specialist inflation-protected very long income real estate investment trust LXi REIT announce a number of accretive acquisitions and profitable disposals on Friday.

The London-listed company said it had acquired a garden centre and a gym for a combined purchase price of £17.1m, reflecting a 5.6% blended net initial yield net of acquisition costs.

It said the garden centre was acquired, by way of purchase and leaseback, with a new, unbroken 30-year lease in place to Dobbies Garden Centres, with a guarantee from its parent Dobbies Garden Centres Group.

The new lease benefitted from annual retail price index-linked rent reviews, collared at 1% per annum and capped at 4% per annum compound.

LXi said the property was a “modern” garden centre, with an extensive range of buildings across a large 18-acre site, along with 500 parking spaces.

It was well located in the Northumberland market town of Morpeth, within a mile of the A1, and was being acquired at a low capital cost and low rental base, with a high vacant possession value.

The firm said it had also exchanged contracts to forward-purchase a new gym facility in Andover, which had been fully pre-let to Pure Gym on a new, unbroken 15-year lease, with five-yearly fixed rental uplifts.

It said the property, which would comprise a brand-new gym facility of 15,000 square feet, was strategically situated south of the A303, approximately 1.8 miles west of Andover town centre.

The acquisitions were funded through a number of disposals, including a portfolio of social housing assets for £14.05m, in aggregate, to a social housing specialist.

LXi said that disposal generated an “attractive” geared internal rate of return for the company of 19.1% per annum, and reflected an exit yield of 5.3%, which compared “favourably” to the acquisition yield of 6.0% paid by the firm.

It also equalled the latest independent valuation yield of the assets.