LXi REIT forward funds GE Scheme

March 2017

In its first purchase since its IPO in February, LXi REIT has forward funded a new manufacturing and head office facility for the GE Oil & Gas Group in Cramlington, Northumberland.

The total funding commitment is £11.09m, reflecting a net initial yield of 5.75% on the asset acquisition.

The property – a purpose-built, office and industrial scheme, totalling 74,110 sq ft – has been pre-let to GE Oil & Gas subsidiary PII Ltd, whose lease obligations are guaranteed by GE UK Group, part of General Electric.

The lease will run for a term of 20 years (with no tenant break right) from completion of construction works and is subject to five-yearly, upward-only rent reviews index-linked to the Retail Price Index (collared and capped at 1.5% pa and 3.5% pa compound).

Full planning consent has been granted, the tenant pre-let has exchanged and the company is acquiring the land and forward funding on a fixed-price basis. The acquisition is being funded from equity resources, with senior debt finance expected to be introduced in the near term.

Simon Lee, partner of LXi REIT Advisors, said: “With a lease term certain of 20 years to the strong covenant of GE UK Group, this forward funded investment provides secure, long-term and RPI inflation-linked income for the company, with an attractive initial yield. GE’s commitment to the location is demonstrated by the extensive fit-out works it is funding and the fact that it has been based at this site for over 30 years.”

Prime Retail advised LXi REIT.