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Multi-purpose REIT invests all its equity
One of a swathe of new investment vehicles in the social housing sector has used up all its equity and debt.
LXi REIT (real estate investment trust), has invested its entire £138m initial public offering (IPO) – as well as £55m from a loan – in various different kinds of real estate.
The REIT, which launched with the intention of investing only in commercial properties, has invested £44m in the social housing sector. This makes up 23% of its total funding.
Four months after launching in February, LXi REIT announced that it was expanding into the social housing sector. Previously, it had invested in commercial real estate of various kinds, from hotels to factories.
Social housing is the second-largest area of investment for the REIT. This is behind hotels, in which it has invested 30% of its funding, and ahead of care homes, which have received 13%.
Like most of the other REITs to have invested in the sector so far, it has focused exclusively on supported housing. Other REIT managers have suggested that this is because investors are confident that the government will guarantee the rental income from such properties.
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LXi REIT invested its last remaining £13m of funding on a portfolio of supported housing properties across England. It gave no details of the social landlords involved.
All the associations known to have done deals with REITs are on the smaller end of the sector, most owning fewer than 350 units and all owning fewer than 1,000.
The Homes and Communities Agency recently warned that smaller housing associations that lack business expertise ought to be cautious before doing deals with REITs, and should ensure that they fully understand the terms of any deals they might sign up to.
Simon Lee, partner and fund manager at LXi REIT Advisors, commented: “We are very pleased with the company’s strong progress since listing on 27 February 2017 and to have deployed our equity and debt in full in this period.
“Coupled with our substantial investment pipeline of secure, long-let index-linked property assets, the company is well positioned with an excellent platform to deliver attractive inflation-protected income and capital returns to our shareholders.”
