UK commercial property investor LXi REIT has announced three acquisitions for a total cost of £80 million, reflecting a net initial yield of 5.25%, and a disposal worth £7.8 million, reflecting a net initial yield of 3.8%.
The company has acquired a substantial Life Science and Biotech campus in York. The Campus, which extends to 382,000 sq ft of highly specialist, world-class facilities across 82 acres, is an internationally renowned science facility.
The campus is fully let to Capita plc on a long lease with 25 years unexpired until first break. The rent increases on a five-yearly basis in line with RPI inflation (capped at 3.5% pa). Capita plc is listed on the London Stock Exchange, with a market cap of c. £840 million.
75% of the underlying income at the campus is derived from UK Government agencies, with the remainder derived from high-growth SMEs. As such, the rent is underpinned by the current operational tenants, who include the Department for Environment, Food & Rural Affairs (DEFRA), Public Health England (PHE) and The Animal and Plant Health Agency (APHA).
The current rent is a very low £7.50 psf and is highly reversionary relative to the ERV of c. £13.50 psf.
LXi REIT said occupational demand for the campus is significant, including from Government entities, and there is expansion space at the property which may provide opportunities for the company to further enhance the value of the asset through the pre-let forward funding of additional buildings.
The company has acquired, through an off-market transaction, STV’s media studios and HQ facility in Pacific Quay, Glasgow.
The Media Facility, which was purpose-built for STV, comprises 63,000 sq ft over four floors, along with 150 car parking spaces. It is mission critical for STV’s business, containing all of STV’s live news studios, along with editing and data storage and processing facilities. The property remained open throughout the pandemic.
The media facility benefits from a new, unbroken 20-year lease to STV plc, demonstrating the tenant’s commitment to the site. The current rent reflects a low £16.25 psf, which is highly reversionary. Grade A office rent in Glasgow is currently in the order of £35 psf. The rent, during the lease term, increases five yearly at a fixed rate of 1.5% pa.
The Media Facility is well located on the south side of the Clyde at Pacific Quay. The area has become Glasgow’s media and tech hub and is also home to BBC Scotland. Barclays have recently agreed to occupy 300,000 sq ft at Buchanan Wharf, which is to the east of the site. Over the adjacent bridge are the SSE Hydro, SEC Centre and SEC Armadillo, which are Scotland’s leading events venues.
STV plc, which is listed on the London Stock Exchange, is Scotland’s equivalent of England’s ITV and forms a key function as a national broadcaster and content producer. The lease benefits from the full PLC covenant.
The company has acquired a waste recycling and storage facility in Aberdeen.The Recycling Facility is let to Biffa plc on a long lease with 14 years unexpired to first break. The rent increases on an annual basis in line with CPI inflation, with a collar of 2% pa and a cap of 4% pa.
The Recycling Facility is Biffa’s only waste transfer site in Aberdeen and the company has commenced discussions with the tenant to increase the length of the lease. Biffa is the leading integrated waste management company in the UK and is listed on the London
Stock Exchange, with a market cap in excess of £1 billion.
The Recycling Facility is located two miles south of Aberdeen city centre and harbour, within East Tullos, one of the principal industrial areas serving Aberdeen.
Disposal of Lidl Foodstore, Chard
The company has sold its Lidl foodstore in Chard, Somerset for £7.8 million, reflecting a low exit yield of 3.8%.
The sale price reflects a material premium of 38% to the acquisition price paid by the company and generates an attractive geared IRR of 26% pa. The company acquired the property as a forward funding, at a 5.5% net initial yield, in 2017.
The 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, LXI REIT Advisors.