LXi REIT has acquired a £20.25m long-let student accommodation scheme in Dundee, reflecting a net initial yield of 6.3%.
The property is fully let to FTSE-listed support service company Mears Group on a lease with an unexpired term of more than 21.5 years with no tenant break right, expiring on 22 September 2039.
The 413-bed development comprises 379 single rooms within cluster flats of two to six beds, alongside nine one-bed flats and 25 self-contained studio flats.
A significant refurbishment of the building was completed in September.
The acquisition is being funded using the proceeds of the company’s new 11.5-year loan facility secured from Scottish Widows in December 2017 at a fixed rate of 2.85% per annum.
LXi REIT said the property benefits from a high level of occupancy and Dundee has a strong underlying supply/demand imbalance for student housing, with university-provided accommodation in the city representing only 15% of total stock.
The property is strategically located in the centre of Dundee, within a five-minute walk of both the University of Dundee and Abertay University, which have a combined student population of 18,915.
The company has now deployed £263m of equity and debt capital (excluding costs) since its IPO in February 2017 at an average net initial yield of over 6%, with an average unexpired lease term to first break of 24 years.
It has diversified across nine robust property sectors and 23 tenants and with 97% of the income inflation-linked or with fixed-uplifts.
The company is in solicitors’ hands on further acquisitions which are expected to complete shortly and which will absorb the balance of its debt facilities.
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