Theme park landlord’s on track to calmer ride
FOR shareholders in LXI REIT, the landlord that leases space to the likes of Thorpe Park and Alton Towers, recent performance has been a bit of a rollercoaster.
At the start of last month, the shares were at £1.51. Now they stand at £1.19. That’s not the sort of ride any of us were queuing up for, and investors could be forgiven for wanting to get off the Ghost Train before there are any more sudden plunges.
No one buys into LXI for the thrills and spills. The company’s name, which stands for Long Indexed Income, oozes reassurance about the company’s sensible mission. It invests in commercial property assets which it leases to household names such as Premier Inn, Starbucks and Waitrose, gaining it long-term inflation-linked income in the process. That all sounds comforting in the current climate – so why are investors climbing the Tower of Terror?
The truth is that LXI is suffering from problems that are not of its own making, which don’t look to be fully resolved soon.
The rise in gilt yields is bad news for LXI, because it impacts on valuation and the cost of debt and means that the company’s own yield looks less tasty for those looking for income. Add to these factors, worries about how a fall in online shopping and leisure activities could affect a landlord like LXI and it is no wonder that the shares slid.
The company’s trading update, out earlier this week, sought to calm fears. Coming two weeks after it abandoned a proposed deal with Sainsbury’s due in part to current volatility, the business said that the value of its assets had fallen by 1.4 per cent.
However, the company has collected 100 per cent of its rent, and broker Numis described the update as ‘solid’ and ‘reassuring’. A new and innovative funding deal, known as an ‘income strip’, has given the firm more financial headroom and most of its debts are fixed, while leases are both long term, and in some cases, inflation linked.