7th Jun 2023 13:10
(Alliance News) - LXi REIT PLC's portfolio is on more diverse and balanced footing, according to broker Liberum, following a tie-up with Secure Income REIT PLC.
The London-based commercial real estate-focused investment trust on Wednesday announced its first annual results since its merger with Secure Income. Liberum noted the deal makes year-on-year comparisons "difficult".
LXi REIT's new combined portfolio has 350 assets, up from 193 before the merger. The GBP385 million acquisition was completed in June 2022, with Secure Income's portfolio at the time including 11 private hospitals and the Alton Towers and Thorpe Park amusement parks.
Liberum explained: "Through the merger, the company's portfolio has improved in terms of diversification with a significant increase in exposure to the more defensive healthcare sector as well as the more cyclical theme parks sector. We think this new merged portfolio will provide a better balance between stability and higher income growth through a bigger exposure to theme parks and budget hotels."
LXi said its post-merger portfolio boosted its rental income, which tripled to GBP203.5 million in the year ended March 31, from GBP58.5 million the prior year.
However, LXi said its net asset value at March 31 was 123.0 pence per share, down 14% from 142.7p per share at the same time last year. The NAV total return was negative 11% compared to 18% the year before, but ahead of the negative 16% CBRE All Property Benchmark.
Shares in LXi REIT were up 0.1% at 101.00 pence each in London on Wednesday afternoon.
The company swung to a GBP287.1 million annual pretax loss from a GBP161.3 million profit the year before, which it attributed to a GBP406.7 million loss in the change in fair value of investment property.
LXi declared a total dividend of 6.30p per share, up 4.9% from 6.0p per share for financial 2022. It also declared a 1.575p per share target interim dividend for the first quarter, and reaffirmed its 6.6p target annual dividend for financial 2024.
Liberum noted that EPRA earnings per share increased 36% to 8.3p while the portfolio value more than doubled to GBP3.36 billion, which it said was primarily due to cost savings achieved by the merger.
"Going forward, the company expects to benefit from significant merger synergies and identifies a significant pipeline of assets," Liberum analysts commented.
It said this would be achieved through permanent structural changes in open-ended funds, refinancing events due to maturing low-cost bonds, further value opportunities in the existing portfolio and potential for consolidation in the long income sector.
However, Liberum also said that new rent agreements, which are now mainly linked to upward-only revisions based on CPI or based on fixed rents, will make it harder for LXi to increase rents in future.
"Overall, the results presented today contain no surprises and we look forward to see how the company takes advantage of synergies and investment opportunities," Liberum concluded.
By Emma Curzon, Alliance News reporter
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