Secure merger boosts LXi rental income by two-thirds

LXi REIT has seen half-year rental income rise by two-thirds to £125m, following its merger with Secure Income. In a stark demonstration of the wide gap between the diminishing values of commercial real estate and strong rental returns, the REIT reported that operating profit was up 75% to £116m for the six months to the end of September, while the value of the portfolio dipped by 4.4% to £3.45bn. Net assets fell by 5.3% to £2bn, giving an LTV of 38%. LXi said the planned sale of 66 Travelodge hotels for £210m was going ahead, taking the total value of disposals in solicitors’ hands to £220m, which would lower LTV to 34%. The REIT raised £32.6m from disposals during the half year. Chair Cyrus Ardalan said: “The performance of the group, notwithstanding the macroeconomic headwinds faced in the period, is testament to the resilience of our strategy, diversified nature of the portfolio, proactive asset management and capital structure.” He added that the fall in capital values was “in line with prevailing market conditions” but had been partially mitigated by inflation-linked income returns. As a result the dividend is up 5% on the previous year, “with the potential for further growth with a further increase anticipated next year”, he said. The merger, which completed in July last year, also doubled the REIT’s portfolio from £1.54bn to £3.36bn, with the portfolio growing to 350 properties. The REIT’s contracted annual rental income grew to £204m, up from £202m in March, as a result of rent reviews on 49% of the portfolio, with an average increase of 3.6% pa in the period. To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews