Wed, 01 Sep 2021 | BUSINESS SALE
Property investor LXi REIT has announced the acquisition of a portfolio of 23 UK nursery schools for £34 million. The properties were acquired, and have immediately been leased back to, Europe-wide education and child care services firm KidsFoundation.
The acquisition was funded via the equity proceeds of LXi REIT’s £100 million placing in July and is the company’s first sale and leaseback deal in the UK’s nursery school sector. The purchase price for the portfolio represents an accretive 5.5 per cent net yield.
The deal comes amid a period of considerable M&A activity and consolidation within the UK’s nursery school and child education sector. While there are numerous operators with sizeable portfolios of nurseries, the sector remains fragmented with scope for considerable consolidation.
Discussing the acquisition, LXi REIT said: “The Nurseries are well located across England, with strong and affluent catchment populations and the rent has been set at a sustainable level to produce a high rent cover of 2.75X on an individual asset basis. This ensures the rent remains affordable for the tenant whilst the investment is also underpinned by vacant possession value.”
The company added: "Each property benefits from a new, unbroken 30-year lease to the top entity within the KidsFoundation group. The rent increases on an annual basis in line with RPI inflation until 2030, from which date the reviews convert to CPIH inflation plus 0.83 per cent per annum. The reviews contain a collar of 1 per cent per annum and a cap of 4 per cent per annum.”
LXi REIT partner John White commented: "We are delighted to have made this first, substantial sale and leaseback acquisition for the company in the robust nursery school sector. The portfolio provides LXI with highly secure, inflation-linked and diversified 30-year cashflows, supported by sustainable rents and strong residual values."
Read about another recent UK nursery portfolio acquisition here.
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