LXi REIT lifts dividend target as rent collection remains strong

LXi REIT announced its new dividend target on Monday, saying it was aiming for a fully-covered annual dividend of 6.3p per share for the 12 months starting 1 April.

The FTSE 250 real estate investment trust said that represented a 5% increase over the 6p dividend target for the year ending 31 March, which it remained on track to meet.

It said its new target assumed that future rent collection was not materially lower than that achieved so far through the pandemic, and was expected to be paid to shareholders in four equal quarterly instalments of 1.575p.

The company said it was targeting a total shareholder return of a minimum of 8% per annum over the medium term.

LXi also said its rent collection remained “resilient”, with the board expecting to collect 100% of rent due for the first quarter of the calendar year, which would make for rent collection of 100% for the 12 months ending 31 March.

The company's independent valuer, Knight Frank, had valued its property portfolio at £1.33bn as at 31 December.

LXi said that valuation represented a 3.3% like-for-like increase over the three months since 30 September, and a total increase of 9% over that period, as it continued to actively recycle assets through profitable disposals and acquisitions of assets, typically at wider yields and often via relationship-driven forward funding transactions.

It said its valuation movement reflected an element of yield compression, with the portfolio net valuation yield being 4.5% - in line with the 4.6% as at 30 September - alongside ongoing rental growth within the portfolio through index-linked rent reviews, in a period where inflation had “substantially” increased.

LXi said 96% of its contracted rents were index-linked, or contained fixed uplifts designed to reflect inflation over the medium term.

Over the last year, the company deployed £294m of new equity and debt across a range of “defensive and structurally-supported” sub-sectors, with the assets being let to a variety of high-quality tenants.

On the basis of the updated property valuation, LXi’s estimated unaudited net asset value per share as at 31 December was about 139.5p, reflecting growth of 4.1% over the three-month period.

When combined with the 1.5p dividend paid for the quarter, that produced a total net asset value return of 5.2% for the three months ended 31 December.

“We are delighted today to increase our target annual dividend by 5% to 6.3p per share for the year commencing 1 April, whilst also reporting strong growth in our portfolio valuation and unaudited net asset value,” said chairman Stephen Hubbard.

“These reflect the company's solid foundation of secure, long-dated and index-linked assets diversified across structurally supported sectors and robust tenants, underlined by our continuing very strong and resilient collection of rent due.

“The company remains well positioned to provide further value to our shareholders and with 96% of the group's contracted rents either inflation-linked or containing fixed uplifts, the group's portfolio is well placed to deliver defensive inflation protected income returns and capital growth going forward.”

At 0813 GMT, shares in LXi REIT were up 0.7% at 144.4p.