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LXi REIT PLC on Thursday said it was optimistic of further growth opportunities, after posting a loss driven by rising costs related to its recent merger with a smaller peer.
LXi REIT is a London-based commercial real estate-focused investment trust.
For the six months ended September 30, the company swung to a pretax loss of £27.5 million, from a profit of £73.6 million a year prior.
This was despite an upsurge in rental income, which increased to £75.5 million from £25.4 million the previous year.
During the period, LXi Reit merged with Secure Income REIT PLC, a UK-based real estate investment trust, through the £385 million acquisition of its smaller peer.
As a result, it saw finance costs widen to £17.6 million from £3.0 million. Administrative expenses also increased, reported at £9.5 million from £4.4 million a year ago.
However, LXi Reit expects to benefit from ‘significant merger synergies’ in the future, including an estimated £8.6 million of potential annual administrative cost savings. It said it has already begun to see the positive impact of the merger on its income returns, and is confident that full-year results will further demonstrate the success of the acquisition.
Looking ahead, Chair Cyrus Ardalan noted the potential risks posed by volatile markets to interest rates, but said the company’s ‘defensive portfolio’ was well-placed to weather these uncertainties.
‘Our inflation protected rents and very long leases are already showing their defensive qualities. As a result, rental growth has largely offset the negative movement in our portfolio valuations to deliver a neutral total return for the half-year,’ he said.
‘We are in the process of refinancing our shorter-term debt to provide stakeholders with longer-term certainty and to underwrite our progressive dividend policy. We plan to recycle capital through selective disposals to reduce leverage or to capitalise on opportunistic purchases. Finally, we aim to generate and protect value for shareholders through accretive asset management initiatives.’
LXi REIT declared a quarterly dividend of 1.575 pence per share, in line with its annual target of 6.3p.
For the first half, dividends per share totalled 3.15p, up from 3.00p at the same point last year.
LXi REIT shares were flat at 125.40 pence each in London on Thursday morning.
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