Lxi Reit Share Discussion Threads

[williamcooper104] 17/2/2022 18:38

Yep; the yields on last mile logistics look silly; but they're silly on short leases with reversion Dirty industrial now more valuable in most places than resi Used to be that industrial was mostly owned as a yielding land bank to convert to resi or retail

[toffeeman] 17/2/2022 18:28

Great timing for the raise

[riverman77] 17/2/2022 17:30

Yes, uplifts generally capped at 3-4%, so good if we have modest inflation, but not if inflation consistently over 5%. Also, part of the portfolio has fixed uplifts, typically around 2.5%

[spectoacc] 17/2/2022 15:08

@steveyc1 - in common with almost every other "index-linked" or "inflation-proofed" IT, they're not actually either of those things. Collars/caps, to either CPI or RPI, meaning usually a 4% (sometimes 3%) maximum increase.

In most circumstances, when the BoE has a 2% inflation target, that's not a problem. But last print of RPI was 7.8% (admittedly not - yet - annual).

AIRE, SIR, SUPR, PHP and more all in similar boats.

[steveyc1] 17/2/2022 14:33

I thought they had inflation linked rent rises in place so inflation shouldn't cause any headwinds, unless I've got this totally wrong?

[spectoacc] 17/2/2022 13:39

Needs tenants who can afford the rent reviews too. Short lease Last Mile (or any Industrial at all really) the place to be IMO.

Saying that, LXI still has its advantages - will add if it keeps dropping.

[williamcooper104] 17/2/2022 13:32

Yep; the long leases so beloved of the last cycle aren't were you really want to be if we get sustained inflation It's short leases and best of all the right kind of land Infamously the Center point building in Tottenham Court road spent most of the 1970s vacant as the asset value kept increasing with rising market rental values more than it would have if if had a tenant paying a fixed rent

[spectoacc] 17/2/2022 12:39

Hangover from placing more likely surely.

But agreed re caps.

[riverman77] 17/2/2022 11:24

Perhaps people realising that in a high inflation environment this could actually suffer quite badly - very long dated leases, which are either capped at 4% or in many cases fixed uplifts of no more than 2.5%. If inflation takes off then you really don't want to be locked into a 20 year lease such as this.

[apollocreed1] 17/2/2022 11:17

Anyone know why LXI has fallen so much?

[spectoacc] 14/2/2022 10:01

Lol re CRC, good point. Would have had to pay a premium of more than the 5% stamp duty mind.

If LXI are buying assets they like at c.5.1%, with compound uplifts, I think they'll do OK.

Is true we don't know where CPI going medium term (& nor does the BoE), but no question we're going higher near-term - the domestic fuel cap, the oil price, the ongoing Ukraine spat all show that. The bias seems clearly to an upside shock.

If that means the rises later fall out dramatically, then once again, better with 2.5% than 1% collar.

4% to RPI cap is a rare beast - 3%, to CPI, far more common.

[nickrl] 14/2/2022 09:57

Specto good point about misselling although of course peak cpi of 7% isn't necessarily the average across the year. For sure though, even if it does peak and fall back, it will produce a tail on CPI for 12-18mths well above 2% so a collar of 4% isn't to bad. However, with short leases there is a risk tenants walk away either if the price isn't right or they need to make cutbacks because inflation has caused parts of the economy to tank. Mind you with covid restrictions leaving people with cash in the bank I don't believe it will unwind quickly as they will tap into those funds for hospitality and holidays for at least this year.

Finally CPI threat could unwind very quickly if the US and UK stop looking for diversions to their own problems and dial back the rhetoric.

Anyhow onto LXI who seem very capable of searching out assets such that the capital raise will be quickly invested others with big cash balances should take note. Mind you given CRC mkt capitalisation they should have bought the whole company and avoided stamp duty.

[spectoacc] 14/2/2022 08:49

Agreed @riverman77 - many claim to be "inflation-linked", like AIRE, SIR, SUPR, LXI - but it's largely cobblers. If you have a 3% or 4% cap to RPI, and even CPI is expected to hit 7%, then you're falling behind.

Better in that situation to have short leases in a hot sector (Industrials and Last Mile have done +15% rents some years).

Think LXi's new 2.5% compound isn't bad - should beat 1%/3% collar/cap in most scenarios. Good chance we get a year or two of super-inflation, before everything that went up starts to drop out.

Bottom line is "inflation-linked" bordering on misselling.

[riverman77] 14/2/2022 08:45

A combination of fixed uplifts or 4% caps means this won't be a great hedge if inflation really takes off (eg consistently above 5%). Would actually be better to have short leases which can be renegotiated if inflation rises (something like AEWU perhaps?)

[speedsgh] 14/2/2022 08:38

The Compass training facility in Milton Keynes (one of the purchases announced in this morning's rns) has been bought from Circle Property (CRC) for £34.5m. Their own announcement adds a little more info on the asset.

[speedsgh] 14/2/2022 07:57

Interesting to see the change in rental terms on the new 20yr Co-op Food c-stores. Fixed rental uplifts of 2.5% per annum compounded every five years. In recent years their leases have tended to incorproate annual increases linked to RPI/CPI compounded every five years with a 1% collar & 3or4% cap.

[spectoacc] 14/2/2022 07:23

@apollocreed1 - they said in the RNS (& I pointed out) that although they'd doubled from £125m to £250m, they'd already (with days to go) had more than that in applications. So unless you thought they'd increase again, there'd be scaling back.


On your first point:

"The Board of LXi REIT plc (ticker: LXI), the specialist inflation-protected long income REIT, is pleased to announce the following nine acquisitions, funded by its recent £250 million equity capital raise (the "Capital Raise").


The acquisitions, which have been transacted predominantly on an off-market basis with seven different vendors/developers, total £87 million and reflect an accretive 5.1% net initial yield (net of purchase costs), versus the current portfolio valuation yield of 4.5%.


The assets are secured to a wide range of strong tenant covenants on long-term, index-linked leases and are underpinned by robust sectors and affordable rents with strong rent cover.


The Company is in solicitors' hands on a range of further assets and further announcements are expected to be made shortly."

[apollocreed1] 12/2/2022 22:28

@melody9999-Well I'm a bit sceptical they can invest so much so quickly. And I didn't think they really would scale back, but my opinion was a bit premature as I did get scaled back even at the £250m raised limit. So seems turned out good in the end.

They certainly might not want buyers like me. I subscribe to nearly every Investment Trust fundraising on Primary Bid or through brokers like II but then I need to sell within the next few months to use the funds for the next company fundraising.

[melody9999] 11/2/2022 18:59

Apollo 370 - don't understand.

They have a sizeable pipeline that enables them to invest the additional cash quite quickly. I actually bought in when I saw the demand was so high - I like to buy things in demand.

Could you not have reduced your allocation after you saw the RNS?

Anyway you can sell your excess in the market at present without incurring losses. If a few weak holders are doing that, we probably need to get them out of the way before we return to a higher share price and a more normal discount to NAV.

[morton2011] 10/2/2022 10:29

82% received via AJ bell , application made 2 weeks ago, no holdings b4 today

[steveyc1] 10/2/2022 10:28

I applied about a week ago and got 60% allocation

[steveyc1] 10/2/2022 10:27

I applied a week ago and got about 60% allocation

[spectoacc] 10/2/2022 09:51

Think that's around 85% through PrimaryBid here.

[speedsgh] 10/2/2022 07:14

"Demand for the Subsequent Issue significantly exceeded the Maximum Issue Size. All valid applications received under the Open Offer will be met in full, however, valid applications received under the Excess Application Facility, Placing, Offer for Subscription and Intermediaries Offer have been scaled back."...

... Simon Lee, Co-Manager of LXi REIT plc, commented:
"We are very pleased with the result of this oversubscribed capital raise, especially given the tougher market conditions..."