LXI Reit sees valuations fall, but 'green shots' emerging

UK real estate investment trust LXI Reit has said it is seeing "green shoots emerging" after a tough macro environment led to another drop in valuations across its portfolio.

The company, which typically invests in UK commercial property assets with extremely long leases – typically 20 to 30 years to the first break – said the portfolio was valued at £3.19bn at the end of its fiscal first half on 30 September, down from £3.36bn six months earlier.

This is a 4% like-for-like reduction, net of rental growth.

"However, with inflation continuing to fall, and a consensus that the base rate is now at, or close to, its peak, we expect real estate yields to stabilise, and our portfolio to recommence capital value growth as a consequence of our embedded rental growth and active asset management," LXI said in a statement.

The company reported strong trading performances by its key tenants, and said that it collected 100% of rent due during the first half. It reviewed 48% of the rented portfolio during the period, resulting in a 3.7% uplift in rents.

Chairman Cyrus Ardalan said: "the company is in a strong position with our defensive portfolio of key operating assets in structurally supported sectors continuing to demonstrate its over-arching resilience. Our tenant covenants have been further enhanced by strong trading results and the embedded rental uplifts from our long leases are providing ongoing rental growth."

The stock was up 0.1% at 89.9p at 0901.