Our landlord tip is up 50%
LXI Reit was launched in 2017, when inflation fears were surfacing and business uncertainty was running high.
In response, the real estate investment trust opted to focus on commercial properties with very long, inflation-linked leases so it could deliver reliable income to shareholders.
The business is now worth just over £1 billion, the shares have risen from £1 to £1.46 and dividends have grown by an average of 5 per cent annually.
There are 171 properties in the portfolio, the average lease is 23 years and 75 per cent of LXi’s properties are on inflation-linked rents, with a further 20 per cent on contracts where the rent goes up by a fixed amount, averaging 2.5 per cent a year.
Tenants include supermarkets such as Tesco and Aldi, budget hotels such as Premier Inn and Travelodge, a string of Costa Coffee and Starbucks outlets, as well as garden centres, nursery schools and industrial warehouses.
The group also owns a life sciences campus just outside
York, used by the Government for research into diseases including Covid-19.
Most of LXi’s deals are done offmarket, so competition is reduced and the group also specialises in forward funding – providing finance to developers to construct sites once a future tenant has been secured.
This allows the business to acquire properties more cheaply than competitors and to build relationships with both contractors and ultimate tenants. The group’s highly experienced managers, Simon Lee and John White, are also known for being fair – offering relatively low rents to customers, in exchange for long-term certainty of income.
With no vacancies, strong tenants and long leases, LXi can afford to give forward guidance on dividend payments, and shareholders have already been told to expect a 6p pay out for the year to March 31, 2022, up from 5.55p in the previous financial year.
Looking ahead, Lee and White are keen to take LXi to a £2 billion stock market valuation, while increasing dividends and remaining highly selective in what they buy.