(Alliance News) - LXi REIT PLC on Thursday said it has exchanged contracts with J Sainsbury PLC to buy 18 prime grocery stores, on a sale and leaseback basis, for GBP500 million.
On Wednesday, both LXi and Sainsbury's had confirmed that they were in discussions, following a Sky News report.
LXi said that the stores, which are located in the south of England, represent a net initial yield of around 5.0% and will be let back to Sainsbury's Supermarkets Ltd.
Sainsbury's Supermarkets is the main trading company of J Sainsbury, and it is the UK's second largest grocery retailer, with a 15% market share.
"The target portfolio benefits from defensive characteristics including strong trading performance, low and sustainable rents (averaging GBP17.25 per square foot), new 15-year lease terms, five yearly upward only CPI inflation-linked rent reviews (capped at 4% per annum compounded) and attractive 'green' lease provisions," the real estate investment trust said.
LXi added that the buildings are modern, with strong environmental, social and corporate governance credentials including A or B energy performance certificate ratings.
The acquisition is conditional on it raising the necessary funding.
On Wednesday, LXi said it is in discussions with potential investors regarding an equity raise. It expects the raise to have an issue price set at a premium to its estimated net asset value per share as at July 31 of around 142 pence, reduced by the interim dividend of 1.575p that is expected to be declared shortly.
The balance of the purchase price will be funded by a debt facility, which LXi expects will be drawn at an "attractive" maximum rate of 1.5% per year.
Shares in LXi were down 1.3% to 139.20 pence each in London on Thursday mornings, whilst Sainsbury shares were down 0.6% to 193.64 pence.
By Sophie Rose; sophierose@alliancenews.com
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Sainsbury's (SBRY)