In a landmark deal for the UK real estate sector, LondonMetric Property PLC and LXI REIT PLC have agreed to a significant merger. The union, valued at approximately £1.9 billion, will be executed as an all-share transaction. This move is set to reshape the landscape of the UK’s real estate investment trusts (REITs).

Under the merger’s terms, each LXI shareholder will receive 0.55 new LondonMetric shares for every LXI share held. This exchange ratio reflects a premium of 9% over LXI’s undisturbed closing price of 99.5 pence per share. The merger also values LXI at a 13% premium over the average closing price for the month ending 15 December 2023.

Post-merger, the combined entity will be a major player in the UK REIT sector, boasting an EPRA NTA of around £4.1 billion. This merger will make the combined group the fourth largest UK REIT, enhancing access to capital and increasing share liquidity. The combined portfolio is valued at £6.2 billion and will have a strong focus on logistics, healthcare, and entertainment sectors.

The merger is expected to bring substantial cost and operating synergies, targeting an EPRA cost ratio of 7 to 8 per cent in the medium term. It will also result in a sector-leading WAULT (Weighted Average Unexpired Lease Term) of 19 years on full repairing and insuring leases.

The leadership of the combined group will be taken over by the experienced board and senior management team of LondonMetric. This team is known for its disciplined approach to capital allocation and strong occupier relationships. The new group will maintain a conservative loan-to-value (LTV) ratio of approximately 31%, reflecting a robust capital structure.

The combination of LondonMetric and LXI is not just a merger of assets but a fusion of complementary strategic approaches. The focus remains on income compounding, with the objective of delivering progressive dividends and enhanced total shareholder returns.

This merger is a testament to the evolving dynamics in the UK real estate market, focusing on sustainable growth and value creation for shareholders.