LXi REIT has sold a 65-year “income strip” that represents 30% of annual rental income from its Merlin-operated Thorpe Park and Alton Towers assets for £257m.
The deal, struck with an unnamed UK institution, represents a net initial yield of 2.96%. The transaction sees LXi sell the freehold in the properties, then retain 999-year leases and pay aggregate rent of £8.2m. LXi can buy the freehold back for a nominal price of £1 in year 65.
LXi said the “innovative” deal structure means it keeps 70% of the rental income for the properties, along with the freehold and all reversionary value after 65 years.
The REIT will use the proceeds to repay the £232m debt currently secured against Thorpe Park, Alton Towers and Warwick Castle. All were owned by Secure Income REIT before the company’s merger with LXi earlier this year.
Simon Lee, fund manager at LXi REIT, said: “We are delighted to have signed this innovative transaction, which materially reduces the company’s debt levels while generating significant earnings accretion.”
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