LondonMetric-LXi merger to create UK’s 4th largest REIT

The boards of LondonMetric and LXi REIT have agreed terms for the two companies’ recommended all-share merger, announced in December. The deal will create the UK’s fourth largest REIT which will have a combined £6.2 billion portfolio and EPRA net tangible assets of approximately £4.1 billion.

The combined group will have 93% exposure to the logistics, healthcare, convenience, entertainment and leisure sectors and strong exposure to key operating assets “that are mission critical to the occupiers’ businesses” the directors said in a statement.

The merger will create a major new REIT that is aligned to structurally supported sectors with high barriers to entry and income security. A low cost base, better access to capital through greater scale, and enhanced scope for capital recycling and asset management, are also noted as advantages of the merger.

LondonMetric was formed from a merger of London & Stamford Property and Metric Property Investments in 2013 and it has since focused the portfolio on distribution and long income assets through acquisitions as well as the sale of its retail assets. In particular, it has raised its presence in urban logistics, notably through the acquisition of A&J Mucklow in 2019. Urban logistics exposure grew to 44% of the portfolio by 2022 when distribution as a whole represented 75%.

LXi’s portfolio includes healthcare property, budget hotels and theme parks, each of which asset class contributes around 20% of the REIT’s rent roll. UK theme park Alton Towers (pictured) is among the theme parks that the LXi owns along with Warwick Castle and Heide Park in Soltau, Germany.

The terms of the merger mean that LondonMetric will acquire the entire issued and to be issued ordinary share capital of LXi. LXi shareholders will receive 0.55 New LondonMetric shares for each LXi share. On the basis of the closing price of 197.4 pence per LondonMetric shares on 15 December 2023, the merger values LXi at approximately £1.9 billion.

Following completion of the merger, existing LondonMetric shareholders will hold about 54% and LXi shareholders 46% of the enlarged issued share capital of LondonMetric.