LXi REIT and Secure Income REIT will become a top-10 REIT after agreeing a £3.9bn merger.
The merger, which will catapult LXi and SIR into the top 10 UK listed REITs by EPRA net tangible assets, will create a combined industrial-heavy portfolio of 346 properties, with a valuation of £3.9bn. Combined annual rent would be almost £200m, with an enviable WAULT of around 26 years. Some 98% of its rental income would benefit from inflation-linked rent reviews or fixed rental uplifts.
LXi chair Cyrus Ardalan said: “The planned merger of the strongly performing businesses of LXi and SIR will create a substantial, complementary portfolio of attractive operating assets let on long-term, index-linked leases to a diverse group of strong tenants across a diversified mix of robust property sectors.”
The deal would establish the combined group as “the UK’s leading listed sector-diversified, long-income REIT”, LXi said.
SIR chair Martin Moore said: “The combination of these two proven, substantial, complementary, inflation-protected portfolios, which will result in further diversification, significant growth opportunities, access to lower cost of capital, potentially increased share trading liquidity and lower management costs on a faster timescale than we would otherwise achieve, is a tremendous opportunity. Both boards share a common investment philosophy, where growth and a prudent approach to risk management are fundamental components.”
The deal will be conducted as a share swap, with LXi agreeing to take over the entire issued share capital of SIR, handing over three and a third LXi shares for each SIR share.
At the time of the deal, the group will have an LTV of around 40%, but that will be brought down to 30% in the medium term.
Nick Leslau and Sandy Gumm will join the LXi board as non-executive directors.
Ardalan added: “In today’s investment climate, more than ever, security and resilience of cash flows, scale and liquidity, underpinned by clear and compelling strategic direction and cost efficiency are essential components of successful REITs.”
Jefferies is acting as lead financial adviser to LXi REIT on the merger.
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