Annual Report
For the year ended 31 March
2023
Overview
LXi REIT plc 1
Highlights 2
Strategic report
Chairman’s statement 7
Investment Advisor’s report 10
ESG report 17
EPRA sBPR Appendix 28
Property portfolio 38
Key performance indicators 39
EPRA performance measures 40
The Investment Advisor 42
Investment objective and policy 44
Section 172 statement 46
Principal risks and uncertainties 48
Going concern and viability statement 52
Governance
Directors’ report 56
Corporate governance statement 59
Report of the Audit Committee 67
Report of the Management Engagement Committee 70
Depositary statement 71
Directors’ remuneration report 72
Statement of Directors’ responsibilities 76
Independent Auditor’s report 68
Financial statements
Consolidated statement of comprehensive income 86
Consolidated statement of financial position 87
Consolidated statement of changes in equity 88
Consolidated cash flow statement 89
Notes to the consolidated financial statements 90
Company statement of financial position 121
Company statement of changes in equity 122
Notes to the Company financial statements 123
Additional information
Notes to the EPRA and alternative
performancemeasures 129
Glossary 132
Company information 133
Contents
Strategic Report GovernanceOverview Financial Statements Additional Information
Overview
LXi REIT plc Annual Report 2023 1
Strategic Report GovernanceOverview Financial Statements Additional Information
Annual results for the year ended 31 March 2023
1 The portfolio valuation includes forward funding commitments and assets held for sale. Areconciliation between portfolio value and investment property at fair value and IFRS is included
in Note 8 to the consolidated financial statements
2 Pro forma net LTV is stated after adjusting the value of investment properties (the denominator) for the acquisition price of properties that have exchanged but not completed and for costs
to complete forward funded assets and net debt (the numerator) for the acquisition price of properties that have exchanged but not completed plus associated acquisition costs and for
costs to complete forward funded assets
2 LXi REIT plc Annual Report 2023
Financial highlights
Alternative performance measures 31 March 2023 31 March 2022 Change
EPRA EPS 8.3p 6.1p +36.1%
Adjusted cash EPS 6.7p 5.7p +17.5%
Dividend per share 6.3p 6.0p +5.0%
EPRA cost ratio
(including and excluding vacant property costs)
9.5% 15.9% -6.4pts
Total Expense Ratio 0.9% 1.0% -0.1pts
Total Accounting Return (10.7)% 18.2% -28.9pts
As at 31 March 2023 As at 31 March 2022 Change
Portfolio value
1
£3,356.3m £1,544.4m +117.3%
EPRA NTA per share 121.1p 142.6p -15.1%
Pro forma net LTV
2
37% 22% +15pts
IFRS performance measures Year to 31 March 2023 Year to 31 March 2022 Change
Rental income £198.2m £58.5m +238.8%
Operating profit before fair value changes £179.4m £49.2m +264.6%
Earnings per share (19.2)p 22.8p -184.2%
As at 31 March 2023 As at 31 March 2022 Change
Investment property at fair value
1
£3,601.9m £1,499.1m +140.3%
Net assets £2,108.1m £1,300.7m +62.1%
NAV per share 123.0p 142.7p +13.8%
Strategic Report GovernanceOverview Financial Statements Additional Information
LXi REIT plc Annual Report 2023 3
• EPRA earnings per share (“EPS”) up 36.1% to 8.3p
(31 March 2022: 6.1p), and Adjusted cash EPS up 17.5% to
6.7p for the year (31 March 2022: 5.7p), primarily driven by
material cost savings resulting from the merger with Secure
Income REIT plc (“SIR plc”) (the “Merger”) and representing
full dividend cover for the year, underpinning the Company’s
progressive dividend policy
• Sector leading EPRA cost ratio of 9.5% (31 March 2022:
15.9%) and total expense ratio of 0.9% (31 March 2022: 1.0%)
• Dividend per share of 6.3p in respect of year (31 March 2022:
6.0p per share), representing 5% growth on the prior year
• Portfolio independently valued at £3,356.3m (31 March 2022:
£1,544.4m), reflecting a like for like change of (9.6)%. The
movement reflects an outward yield shift of 90 bps to 5.4%
at 31 March 2023 (31 March 2022: 4.5%), offset by 2.3% like
for like rental growth
• EPRA NTA per share of 121.1p (31 March 2022: 142.6p),
reflecting a fall of 15%, primarily driven by yield expansion
across certain property sectors in response to wider
economic conditions and the costs associated with the
Merger, which represented less than 1% of the combined
portfolio value
1
• Pro forma net loan to value (“LTV”)
2
ratio of 37%
(31 March 2022: 22%), with headroom to our medium-term
borrowing policy cap of 40% and substantial covenant
headroom on the loan facilities
• Contractual rental increases due in the next two financial
years expected to reduce LTV to 35.5% in FY24 and 33.8%
in FY25, assuming no change in valuation yield. The Board
remains committed to a conservative medium-term LTV
target of 30%
The UK’s leading sector diversified, long income REIT
• During the year, LXi REIT plc merged with Secure Income
REIT plc to create the UK’s leading sector-diversified,
long income REIT, with asubstantial, defensive and
resilient portfolio
• The scale achieved provides astrong foundation to deliver
secure attractive long-dated and growing income returns
and capital protection to our shareholders
• The Group owns an inflation linked portfolio of
350properties that are 100% occupied with an aggregate
valuation of £3.4bn at 31 March 2023, contracted
annual rental income of £202.2m and aWAULT to first
break of 27 years
• Assets are well diversified across abroad range of resilient
sub-sectors with high barriers to entry, strong underlying
property fundamentals and low starting rents, and are let
on very long-term leases to tenant counterparties that have
demonstrated strong performance throughout previous
economic cycles
• Properties are strategically important to the operations
of our broad range of institutional-quality tenants
underpinning the longevity and security of the Group’s
income streams
• Shareholders continue to benefit from the certainty
provided by the Group’s fully let, highly diversified, triple-
net portfolio of secure real estate assets, sector leading
expense ratios and a conservative and 100% fixed or capped
debt position
Strategic Report GovernanceOverview Financial Statements Additional Information
Annual results for the year ended 31 March 2023 (continued)
4 LXi REIT plc Annual Report 2023
Portfolio summary
As at 31 March 2023 As at 31 March 2022
WAULT to first break 27 years 21 years
Number of assets 350 193
Number of tenants 84 71
Let or pre-let 100% 100%
Portfolio diversification by sector (by contracted rent)
– Healthcare 22% 8%
– Budget hotels 21% 13%
– Theme parks 19% –
– Foodstores 10% 25%
– Industrials 7% 18%
– Others 21% 36%
Rent review type (upward only)
– RPI 26% 54%
– CPI 38% 19%
– Fixed 34% 23%
– Open market 2% 4%
Regular predictable rental growth profile
– Annual reviews 56% 37%
– Five-yearly reviews 44% 63%
– Capped indexed linked uplifts 60% 67%
– Average cap 3.9% 3.6%
– Collared index-linked uplifts 56% 54%
– Average collar 1.2% 1.5%
Strategic Report GovernanceOverview Financial Statements Additional Information
Post year end highlights
Dividends
• Announced increased dividend target of 6.6p
3
per share for
the year ending 31 March 2024, up 5% on the dividend per
share in respect of the year ended 31 March 2023
• Announced a dividend of 1.575p per share for the quarter
ended 31 March 2023, meeting the Company’s annual
dividend per share target of 6.3p
3
Debt refinancing
• Completed our significant refinancing
programme comprising:
- A new £565m three and five-year term loan and five year
revolving credit facility, and
- A new £148m 16-year debt facility
• Achieved maiden investment grade rating and increased
weighted average term to maturity of 6 years (pre
refinancing: 2 years) and a weighted average interest cost
of4.7% pa (pre refinancing 4.3% pa)
Outlook
• The Group’s substantial scale should allow it to benefit from
growth opportunities within our portfolio as well as in the
wider market. The Company has already begun to do so,
with the earnings and NAV accretive Merlin ‘income strip’
transaction and the Travelodge re-gear
• The Board expects the Company and its shareholders to
continue to benefit from significant merger synergies, with
the Group now having one of the lowest cost ratios in the UK
listed real estate sector. We have already begun to see the
positive impact of this on our income returns during the year
and the Board remains confident that the next year’s results,
which will comprise a full year of the combined business, will
further demonstrate this benefit
• We see exciting opportunities in the market in the form of:
- a significant pipeline of assets through permanent
structural change within open-ended funds that have
traditionally held vast prime long income portfolios
- corporates facing a cliff-edge of refinancing events as
their historic, low-cost bonds mature that we expect will
create a source of new, long income stock through sale
and leasebacks
- the opportunity for consolidation in the long income
sector, due to share price discounts and arange of
sub-scale platforms that fail to provide desired liquidity
and downside protection. The scale and diversified
nature of our portfolio and investment strategy and the
demonstrated expertise and skills of our management
team put the Company in astrong position to capitalise on
these opportunities; and
- value opportunities in our existing portfolio through
lease re-gears, strengthening relationships with our key
tenants and other asset management initiatives
• Notwithstanding the very challenging wider economic
headwinds, we remain confident that the underlying
characteristics of our carefully curated portfolio, supported
by our proactive accretive recycling of capital and asset
management strategies, will enable the Group to continue to
deliver outperformance
Alternative performance measures
The Group uses alternative performance measures including
the European Public Real Estate (“EPRA”) Best Practice
Recommendations (“BPR”) to supplement IFRS as the Board
considers that these measures give users of the Annual Report
and Financial Statements the best understanding of the
underlying performance of the Group’s property portfolio.
The EPRA measures are widely recognised and used by public
real estate companies and investors and seek to improve
transparency, comparability, and relevance of published results
in the sector.
Reconciliations between EPRA and other alternative
performance measures and the IFRS financial statements
can be found in Notes 25 and 26 to the consolidated financial
statements and in the Additional Information of the Company’s
Annual Report.
Definitions of alternative performance measures are given
in the Key performance indicators and EPRA performance
measures sections or otherwise included in the Glossary
section of the Group’s March 2023 Annual Report and in the
Additional Information on page 132.
3 These are targets and not profit forecasts
LXi REIT plc Annual Report 2023 5
Additional InformationFinancial StatementsOverview GovernanceStrategic Report
Strategic Report
Strategic Report
Chairman’s statement 7
Investment Advisor’s report 10
ESG report 17
EPRA sBPR Appendix 28
Property portfolio 38
Key performance indicators 39
EPRA performance measures 40
The Investment Advisor 42
Investment objective and policy 44
Section 172 statement 46
Principal risks and uncertainties 48
Going concern and viability statement 52
6 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Chairman’s statement
CYRUS ARDALAN
Chairman
Dear shareholder,
This report covers the year to 31 March 2023, and the maiden
annual results for the enlarged Group, following the merger
with Secure Income REIT plc (“SIR plc”) (the “Merger”), which
completed in July 2022. I welcome the new shareholders
to the Company, and I am very pleased to report to you the
results of the Group.
The Merger has created a substantial defensive and resilient
portfolio, providing a strong foundation to deliver secure
attractive and growing income returns and capital protection to
our shareholders. The performance of the Group, in view of the
macroeconomic headwinds that we have faced in the period, is
a testament to those qualities. We expect to see capital growth
prospects returning once the property market normalises.
Our assets are well diversified across a broad range of resilient
sectors with high barriers to entry, strong underlying property
fundamentals and demonstrably attractive and sustainable
rents. The portfolio is let on very long-term leases to tenant
counterparties that have demonstrated strong performance
throughout the current and previous economic cycles and
have in most cases continued to outperform in the prevailing
economic climate.
Despite the fall in portfolio values during the year across the
market, the Company continued to deliver attractive inflation
linked income returns through a growing dividend, up 5% on
the previous year, and with the potential for further growth,
with another 5% increase in the dividend target announced
post year end.
Share prices and valuations have been impacted by rising
interest rates, but the cost of our own debt has been secured
for the medium-term through our comprehensive refinancing
programme. This, coupled with inflation being widely forecast
to start falling by the end of the calendar year, position
the Company well to benefit from post stabilisation yield
compression. As interest rates reach a terminal level, we
believe we will begin to see the increasing relative attraction
ofproperty as an alternative income stream.
Our portfolio remains a highly attractive investment
proposition at current valuation levels. Sustainable rental
levels have meant that individually our operating assets
continue to represent highly profitable and attractive business
units which our tenants want to retain. The market looks set
for further consolidation with a large number of sub scale
REITs trading at attractive discounts. The platform we have
created puts the Company in a strong position to capitalise
on these opportunities in a competitive market whilst
continuing to provide our shareholders with a stable source
ofgrowing income.
Merger with SIR plc
On 11 May 2022, the Company announced the terms of the
proposed Merger. Voting from respective shareholder groups
demonstrated overwhelming support for the Merger, which
completed on 6 July 2022. This year’s accounts include eight
full months of the results of the enlarged Group. The Merger
has been treated as an asset acquisition for accounting
purposes rather than a business combination. Further detail
of the accounting judgement can be found in Note 2 to the
consolidated financial statements.
The Merger has created the UK’s leading diversified, long
income REIT. The Group’s substantial scale should enable it to
benefit further from significant growth opportunities within
our portfolio and in the market. The Company has already
begun todo so, with two key innovative transactions in the year
in the form of the Merlin ‘income strip’ transaction and the re-
gear ofour Travelodge portfolio.
The Group owns a portfolio of 350 properties that are 100%
let with an aggregate valuation of £3.6bn at 31 March 2023,
contracted annual rental income of £202.2m and a very long
WAULT to first break of 27 years.
The Company and its shareholders have also begun to benefit
from significant synergies, including material deduplication of
management fees and other overheads for eight months of the
period, with the enlarged Group demonstrating a total expense
ratio of 0.9% for the year. (31 March 2022: 1.0%).
Since the Merger, the management team has continued to
execute the complementary investment strategies employed by
both LXi and SIR plc. This has included a focus on long income
real estate, diversification, conservative leverage, and an active
portfolio management strategy identifying opportunities to
unlock further value for shareholders.
LXi REIT plc Annual Report 2023 7
Strategic Report GovernanceOverview Financial Statements Additional Information
Debt capital and refinancing
At 31 March 2023 our pro-forma net LTV was 37%. The Board
and management team remain committed to a medium-
term LTV target of 30%. The Company was very pleased to
announce its first investment grade rating during the year and
we remain committed to reducing our LTV over the medium
term both through active disposals and value enhancing
asset management.
Management has overseen a total of £1.1bn of debt repayment
and refinancing post year end, which has been a significant
achievement in the current climate. In doing so, we have
increased the average debt maturity to 6 years (from 3 years),
with a well staggered maturity profile whilst removing interest
rate risk with an average cost of debt of 4.7% pa for the medium
term and thus protecting the Company’s long term progressive
dividend policy.
Results and dividends
Despite challenging market conditions and volatility in share
prices and property values, the Company has delivered
a resilient performance for the year versus the wider
UKREIT market with a total accounting return of (10.7)%
(31 March 2022: 18.2%), on a geared basis, outperforming the
CBRE all property total returns of (16.2)% on an ungeared basis.
The outperformance was delivered through the defensive
qualities of our portfolio and creative asset management
initiatives that our management team executed in the year.
This demonstrates the attractiveness of both a well-diversified
long-let, index linked portfolio and the scale that allows
opportunities for value growth even in challenging markets.
The Group’s net assets increased by 62% to £2,108.1m in total,
during the year, driven predominantly by the share for share
element of the Merger. On a per share basis, the Group’s EPRA
NTA contracted by 21.5 pence, primarily driven by:
• yield expansion across the majority of property sectors in
response to wider economic conditions, in particular the
rising interest rate environment,
• offset to some extent by the accretive asset management
initiatives of the Merlin ‘income strip’ transaction
and the Travelodge re-gear, as well as index-linked
rental growth; and
• the costs associated with the Company’s merger with SIR
plc, which totalled £35.3m and represented less than 1% of
the combined portfolio value or 2.7 pence per share
1,2
.
We are pleased that the total of our quarterly dividends paid
and declared in respect of the year of 6.3p per share, means
that we have achieved the stated target that we set for the
financial year, for the sixth consecutive year since IPO
3,4
.
The dividend for the year was fully covered by the Company’s
adjusted cash earnings and represents compounded dividend
growth of 5% per annum since IPO, outperforming the
consumer price index during that period which has averaged
3.4% per annum and providing inflation protection to
our shareholders.
Chairman’s statement (continued)
1 Combined independent valuations included in the public merger documents performed by Knight Frank in respect of LXi REIT plc and CBRE in respect of Secure Income REIT plc
2 These costs have been recognised as additions to investment property and expensed through the profit and loss account as afair value movement in the period, in accordance with IFRS
3 These are targets and not profit forecasts
4 After the year end the Directors became aware that certain dividends paid since the Merger had been made otherwise than in accordance with the Companies Act 2006. A special
resolution will be proposed at the Company’s forthcoming AGM to remedy this issue. Further detail is given on page 56
8 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Environmental, Social and Governance (“ESG”)
Embedding ESG considerations into the Company’s strategy is
synonymous with safeguarding portfolio value and as such is
akey focus for myself and the wider Board. Our aim is to deliver
best-in-class ESG integration into a long-income property fund,
facilitated by the Investment Advisor’s on-going progress in this
space under direct supervision of the Board.
The Board is delighted that Barbora Melezinkova has joined
the Investment Adviser’s team as Head of ESG. Barbora is
responsible for helping to deliver on the ESG strategies. The
Board has already implemented an ESG Working Group which
Ismat and I both sit on as Board members.
Some of our ESG highlights during the year have been,
obtaining our first GRESB rating on the portfolio in September
2022, also in September we obtained our first EPRA sBPR
rating. We have also instructed decarbonisation reports on a
tranche of our assets as well as moving all energy provision in
landlord-controlled areas to suppliers that provide green tariffs.
See the ESG Report for more on this and our ESG strategy.
This commitment to ESG reflects our wider commitment
to good stewardship while also giving rise a wealth of
opportunities for value-add asset management initiatives
as our tenants pledge to transition to fully environmentally
sustainable businesses and to deliver value to society beyond
purely financial returns.
Board changes
Following the Merger, the Board was delighted to welcome
Nick Leslau and Sandy Gumm to the Board as Non-Executive
Directors. They bring invaluable expertise and experience to
the Board as well as intricate knowledge of the assets and debt
portfolio of SIR plc.
On behalf of the Board and management team, I would
like to express my deep thanks to Jan Etherden and Patty
Dimond, both of whom stepped down as Directors, for their
contributions to the growth and success of the Company since
its IPO and for the strong legacy they leave.
The Board changes have also enhanced the Company’s Board
succession planning with a more staggered range of tenure
among the Board. We have undertaken a detailed Board review
in the year and look to implement its findings. I very much look
forward to continuing to work closely with the Board to help
steward the business to further success and outperformance
for our shareholders.
Outlook
The successful merger has created aplatform from which we
will be able to grow the Group even further, leveraging our
scale, experienced management team and low cost base.
We see exciting opportunities in the market in the form of:
• a significant pipeline of assets through permanent structural
change within open-ended funds that have traditionally held
vast prime long income portfolios,
• a cliff edge of refinancing events for corporates as their
historic, low-cost bonds mature that we expect will
create a source of new, long income stock through sale
and leasebacks,
• the significant opportunity for consolidation and M&A in
the long income market, due to share price discounts and
a range of sub-scale platforms that fail to provide desired
liquidity and downside protection. The scale and diversified
nature of our portfolio and investment strategy and the
demonstrated expertise and skills of our management team
put the Company in a strong position to capitalise on these
opportunities, and
• value opportunities in our existing portfolio through lease
re-gears, strengthening relationships with our key tenants
and other asset management initiatives.
With forecasts for inflation stabilising and interest rates
reaching terminal level, we believe the property market
repricing will begin to reverse in the second half of the calendar
year. Property values appear to have stabilised since the year
end and properties with defensive qualities tend to be those
that rebound the quickest, particularly in tougher economic
climates where capital chases secure investments.
The Group continues to deliver progressive dividend growth
supported by our index-linked rents and largely fixed debt
costs as well as accretive asset management and is targeting
afully covered dividend of 6.6p for the year to 31 March 2024,
representing an increase of 5% on the prior year.
I thank both the Board and the management team for their
continued work in the year. Going forward we remain focused
on managing both the risks and opportunities that our
portfolio presents. We remain highly confident in our ability
to successfully capitalise on the growth opportunities that
we continue to identify and on continuing to provide asecure
and growing income return to our investors. This will enable
us to continue to enhance and unlock sustainable value in our
defensive, resilient portfolio for all of our stakeholders.
Cyrus Ardalan
Chairman
6 June 2023
LXi REIT plc Annual Report 2023 9
Strategic Report GovernanceOverview Financial Statements Additional Information
Investment Advisor’s report
Certain statistics and KPIs are alternative performance
measures for which definitions are given in the Key
Performance Indicators and EPRA performance measures
sections or otherwise as included in the Glossary.
Portfolio overview
The Group’s portfolio comprises 350 fully let and well
diversified long-income properties across 13 sub-sectors with
multiple underlying uses. The assets are let on very long leases
averaging 27 years to first break, to over 80 separate tenant
operators on low and sustainable rents. All leases are granted
on full repairing and insuring terms, protecting the Group from
property cost leakage and capex requirements.
The Group’s lease arrangements provide contracted annual
rent of £202.2m. The lease rent review provisions provide
inflation protection with 98% of the reviews by rental value
either containing index linked or fixed rental uplifts. Rents are
reviewed on an annual (56%) or five-yearly (44%) cycle.
The expectation of poor economic growth, generationally
high levels of inflation and consequent interest rate rises
across global economies, have significantly impacted property
values in the UK. Long income property value has traditionally
correlated more closely with GDP growth rather than interest
rates. A significant increase in property investment as an
alternative income asset class due to the attractive spread to
gilts and other debt and equity investments, has meant that as
that gap has tightened and even reversed through interest rate
hikes, even inflation linked long lease properties have seen a
dramatic yield shift.
The Company’s defensive characteristics, with very long
and indexed leases, broad diversification and a proactive
management style has provided partial protection.
The portfolio was independently valued at £3,356.3m
(31 March 2022: £1,544.4m) with contracted rental income of
£202.2m per annum, reflecting a like for like change of (9.6)%
for the 12 month period. The movement reflects an outward
yield shift of 90 bps to 5.4% at 31 March 2023 (31 March 2022:
4.5%), offset by 2.3% like for like rental growth.
The Company’s total return for the 12 months ending
31 March 2023 of (10.7)%, on a geared basis, is ahead of the
CBRE All Property Benchmark of (16.2)%, on an ungeared
basis, for the same period. This is particularly pleasing given
the lower risk attributes the portfolio compared to the all
property benchmark.
Our strategy remains to invest in assets that are mission critical
to our tenants’ operations in defensive sectors with astable
outlook and high barriers to entry. The merger with Secure
Income REIT has enhanced both the defensive characteristics of
the portfolio and its income security. It has provided accretive
asset management opportunities, some of which have already
come to fruition and are detailed below. Additionally, selective
disposals have and will continue to provide the ability to
reduce sector and tenant concentration, repay debt and reduce
leverage and to redeploy capital opportunistically.
Sector exposures
The portfolio is well diversified across abroad range of resilient
sub-sectors with high barriers to entry, strong underlying
property fundamentals, and low starting rents. The assets
are let on long-term leases to tenant counterparties which
have demonstrated strong performance throughout previous
economic cycles.
This multi-sector strategy both provides downside protection
and offers abroad universe of assets in which to deploy capital.
The strategy gives investors adiverse and flexible portfolio
where exposures can be increased or reduced as appropriate to
address external factors such as changing consumer behaviour,
enabling the company to pivot towards sectors where we
anticipate the best returns for our shareholders over both the
short and the longer-term.
The Group’s sector weightings including asset acquisitions for
which contracts have exchanged but have not yet completed,
are as follows:
Healthcare – 22% (31 March 2022: 8%)
Following the merger with Secure Income REIT, Healthcare
has become the Company’s largest sector by capital value. It
is asector that has demonstrated resilient performance with
robust occupancy rates and significant capital inflows over
along period of time. In the period it has outperformed the
CBRE All Property Benchmark of (16.2)% compared to (6.2)%.
The sector tends to be characterised by long inflation linked
leases giving occupiers the security they need to invest in this
capital-intensive sector and indexation allowing business to
plan effectively. The expectations of the end user are high and
occupiers require property that enables them to continue to
thrive in this competitive market.
Due to the supply/demand imbalance in UK hospitals and
other healthcare properties, in general healthcare valuations
have not been affected by cyclical economic trends. Limited
quality stock, high barriers to entry and an aging demographic
that is living longer are underpinning demand and driving
increased capital allocation to the sector. We are currently
seeing continued unsolicited interest in the healthcare portfolio
despite challenging macro economic conditions. This lack
of correlation with other real estate sectors provides the
Company with enhanced risk mitigation through diversification.
Ramsay Health Care (Ramsay) is the Company’s major tenant
within the sector with 18% of the total portfolio rental income.
Ramsay operates aglobal network of clinical practice, teaching
and research facilities. They operate across ten countries, with
over 11m admissions and patient visits to facilities in more
than 530 locations. Within the UK, Ramsay operate 34 acute
hospitals of which 11 are in this portfolio. Ramsay recently
acquired Elysium Healthcare, aleading independent operator
of 76 long-term medium and low secure hospitals and complex
care homes for individuals with mental health conditions.
Ramsay demonstrated strong results for H1 2023 with
apositive outlook. We note the rise in demand for the private
10 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
pay market and the ongoing propensity for the NHS to work
with independent providers and we expect these trends to
continue. This is particularly the case in the provision of mental
health services where demand has increased dramatically in
recent years; asituation that has been exacerbated by Covid
lockdowns and an area we expect Ramsay to significantly
benefit from following the integration of the Elysium business.
Ramsay is well positioned to continue to take advantage of
the large increase in self-pay demand driven by increased
NHS waiting lists as well as benefitting from increased NHS
contracts as the Government seeks to reduce waiting list for
non-emergency operations. Through the structure of the lease,
we have guarantees from the ultimate, listed parent company
meaning we have the benefit from the strength of their
global operations. The Ramsay Group also benefits from an
investment grade rating.
Looking forward, this is asector where we continue to see
strong growth prospects. Investment pricing has stabilised and
recovered rapidly following the disruption of the mini budget
last year and we anticipate the appetite from both occupiers
and investors to continue in this sector.
Hotels – 21% (31 March 2022: 13%)
This sector has provided robust performance despite wider
economic challenges. This was, in part, due to our proactive
management approach securing an accretive rent smoothing
and lease extension agreement with our largest hotel tenant
Travelodge. Golden Tree is now the sole owner of Travelodge,
which is also a positive step and we will continue to work
closely with them.
The budget hotel sector is experiencing a boom, with both
of the Company’s tenants reporting record numbers as more
and more customers turn to a trade down alternative and
following the easing of the pandemic lockdown restrictions in
the UK with both major operators, Travelodge and Premier Inn,
surpassing pre-pandemic performance. Travelodge reported
record profits for their financial year ended 31 December 2022
from previous 2019 highs. Likewise Premier Inn reported H1
2023 revenues (26weeks to September 2022) up 25% on the
equivalent FY2020 period. Both operators are benefitting from
strong demand from both business and leisure customers
as the staycation trend continues and business travel
recovers. The budget sector looks well placed to continue
this outperformance as more travellers trade down amid
the continued cost-of-living backdrop. Both operators are
continuing with a sustained programme of investment in their
portfolios which is further supporting market outperformance.
Our assets delivered like for like performance of (1.1)% over the
year making it our second best performing sector. Investment
market demand has remained despite the wider challenges in
the economy, with end user demand strong and the best hotels
in strong locations let to the covenants trading well.
Theme Parks – 19% (31 March 2022: -%)
This is anew sector for LXI that was acquired as aresult of the
merger with Secure Income REIT. It gives the Group exposure
to adiverse, uncorrelated sub sector, secured against the
dominant operator in the UK, Merlin Entertainments. Merlin
operates all the major attractions in the UK including our assets
Alton Towers, Thorpe Park and Warwick Castle. They are the
only operator of UK attractions to feature in the Aecom’s Top
20 attended attractions for EMEA in 2021.
Merlin is Europe’s largest, and the world’s second largest,
visitor attraction operator with 142 attractions in 25 countries.
This sub sector of UK leisure and hospitality has proven to be
non-cyclical and benefits from a level of discretionary spend
consumers are not willing to forgo. Merlin reported trading
at its resort theme parks business in 2021 was ahead of pre-
pandemic 2019 levels and that year to date 2022 was ahead of
budget at the end of Q3 2022. Through the structuring of the
lease, we have guarantees from the ultimate parent company
meaning we have the benefit from the strength of their
extensive global operations.
Merlin continues to invest heavily in its estate. Enabling works
have begun at Thorpe Park for a new rollercoaster due to open
in 2024 with a capital investment from Merlin of c£20m. The
Company works closely with Merlin to realise opportunities
within the estate and have agreed to fund the development
of a new 60-bedroom hotel at Warwick Castle, set to open
in January 2024.
Given the significant barriers to entry for any new theme parks
in the UK, and the very long inflation linked income with over
54 years to expiry, the Company sees this sector as providing
akey source of long term, defensive and diversified income.
Foodstores and Essentials – 10% (31 March 2022: 25%)
The yield compression that has been seen over the previous
few years in this sector has partially been reversed in the year.
Yield expansion has been driven by both significantly reduced
investment activity by domestic single sector REITs and US
REITs who had bid down prices significantly in the past five
years along with the economic impact of interest rate increases.
However, foodstores remain an important sector for the
portfolio and underlying occupational demand remains strong.
It is a sub-sector that forms part of the structure of the
economy with significant non-discretionary spend. Our assets
have been carefully selected at the point of purchase, are well
located, rack rented or reversionary and have long inflation
linked leases. They are let to a variety of well established
occupiers and we anticipate they will continue to perform well
in the medium term as capital markets stabilise.
We continue to see value in asset purchases in this sector
by working with major operators on sale and leaseback
opportunities and from open ended funds disposing of standing
investments to meet their redemption requirements.
LXi REIT plc Annual Report 2023 11
Strategic Report GovernanceOverview Financial Statements Additional Information
Industrial – 7% (31 March 2022: 18%)
Despite the continued strength of occupier demand there has
also been notable yield expansion in this sector during the
period. The Company’s assets have performed comparatively
well and have significantly outperformed the CBRE Industrial
Benchmark (27.7)%.
The Group’s industrial assets are generally underpinned by their
strategic, often business-critical, importance to the occupiers.
They are let on long inflation linked leased to arange of strong
covenants and, in many cases, rents are reversionary. Generally,
rent reviews are subject to 3-4% pa, securing inflationary
linked growth in the long run, whilst ensuring that rents remain
affordable for occupiers. At purchase we target asset where
vacant possession value is close to, or sometimes in excess
of, the price.
Looking forward, it is anticipated that occupier demand will
remain resilient, and that industrial property development
will continue to be constrained by substantial rises in building
costs making new schemes less profitable for developers and
potentially unviable.
It is anticipated there will be some yield compression in the
medium term in line with the recovery of the capital markets
and the Group’s industrial assets will be well positioned to
benefit from this recovery.
Other – 21% (31 March 2022: 36%)
There is a wide variety of assets held by the Company, making
the strategy truly diversified and giving investors exposure to a
broad range of different assets and tenants. The largest sectors
detailed above constitute 79% of the Company’s total holdings.
The remaining 21% includes leisure, public houses, Manchester
Arena, Car Parks, Garden Centres, Life Sciences, Drive-thru
coffee pods and Education. See property portfolio section
for breakdown.
Acquisitions and disposals
In addition to the properties that the Company acquired
through the merger with Secure Income REIT, it has separately
acquired five new properties during the year totalling £89.1m:
• A foodstore let to Asda in Halesowen on a lease with 21 years
remaining. The lease benefits from fixed rental increases of
3%pa on a 5 yearly basis.
• A garden centre let to Dobbies in Reading on a 35 year
lease with annual reviews to CPI+1% capped at 4% with a
collar of 1.5%.
• A forward funding of a drive thru coffee pod pre-let to Costa
on 15 year lease with 5 yearly reviews to RPI subject to
annual Cap of 4% and collar of 1%.
• A forward funding of a Nursery in Addlestone, Surrey, pre-let
to Busy Bees on a 25 year lease with 5 yearly CPI reviews
annually capped at 4% and a collar of 1%.
• The forward funding of two foodstores in Houghton Le
Spring pre-let to Tesco on a 20 year lease and Home Bargains
on a 15 year lease. The Tesco lease benefits from 5-yearly
reviews to CPI capped at 2.5%pa.
The Company disposed of the following assets totalling £29.5m:
• Two car showrooms let to Cazoo in Northampton
and Chertsey.
• A hotel let to Premier Inn and adjoining retail park
inSaffron Walden.
Significant asset management transactions
Merlin income strip
As the first part of re-financing, the Company used an
innovative ground lease structure to release capital. This
involved the sale of a65-year income strip in Alton Towers
and Thorpe Park in October 2022 for £257m. The sale price
represented anet initial yield of 2.96% NIY on 30% of the annual
rental income. The structure comprised selling the freehold
in the properties to aUK institutional investor, with 999-year
leases granted back to the Company pursuant to which the
Company pays an annual aggregate rent of £8.2m, representing
30% of the annual rental income received from the tenant. The
Company can acquire the freehold back for £1 in year 65.
This has been aperformance accretive way of diluting the
Company’s exposure to one of its largest tenants, thereby
improving diversification at portfolio level and providing capital
at avery cost effective rate compared to traditional bank debt.
Travelodge lease re-gear
In December 2022, the Company exchanged contracts with
Travelodge Hotels Limited on an accretive lease regear across
122 hotels. In return for converting the 5-yearly uncapped RPI
reviews to 5 yearly CPI+0.5% compounded with caps at 4% and
collars at 1%, the Company has extended the unexpired lease
terms by aweighted average of nine years. This resulted in the
weighted average unexpired lease term to first break on the
122 hotels increasing from 19.5 years to 28.5 years. No rent-free
period was granted. The Company and Travelodge also agreed
a“rent smoothing” across the 122 hotels so that individual rent
levels were reset to best reflect the trading performance of
each site the total rent roll remains the same. At the period end
not all of these leases had completed as some superior landlord
approvals are pending. This is simply a timing issue as consent
cannot be withheld unreasonably.
The Company took the opportunity to agree “green lease”
provisions to modernise the leases including to effect the
following principles: (i) sharing of energy, water, recycling
and waste data; (ii) co-operating on the environmental, social
and governance strategies of the landlord and tenant; and
(iii) future proofing the leases to ensure the landlord has the
necessary rights to enter the properties to make environmental
performance improvements.
Investment Advisor’s report (continued)
12 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Rent collection
The Company’s operational performance has remained robust
throughout the year with 100% of rent due having been
collected. The Investment Advisor works closely with both
tenants and property managers to ensure timely payment
of rent. The portfolio has 100% occupancy and 98% of rent
reviews are inflation linked or subject to fixed uplifts. This
further assists with the tenant relationships, removing
the requirement for protracted rent review negotiations
and enables businesses to plan which in turn encourages
prompt rent payment.
Inflation and rent reviews
Due to various geopolitical and macroeconomic factors we have
seen a year of high inflation. CPI annual growth averaged 10.1%
and RPI annual growth averaged 13.5% for the year to March
2023. The Group’s 122 contracted rental uplifts in the period
were broadly capped or fixed and delivered average growth
of3.6% pa, resulting in like for like rental growth of 2.3%.
The Group’s portfolio income is 98% index-linked or contains
fixed rental uplifts, which breaks down between RPI 26%,
CPI38% and fixed 34%. The Group’s fixed uplifts average
2.7%pa. Of the Group’s portfolio, 56% of the rents are subject
to collared uplifts, which average 1.2% pa and 60% are subject
to capped uplifts, which average 3.9% pa. We therefore expect
the Group to capture the vast majority of inflation over the
medium-term, but the Group is also well protected against
lower inflationary periods.
The portfolio’s rent reviews are either on annual (56%) or five-
yearly (44%) cycles, and over the following five year period the
Group expects the following percentage of rental income to
review in each financial year:
Year ending 31 March Annual Five-yearly Total*
2024 56% 5% 61%
2025 56% 5% 61%
2026 56% 11% 67%
2027 56% 10% 66%
2028 56% 9% 65%
Linking rental growth in the Group’s portfolio to indexation
seeks to provide investors with inflation-protection, whilst also
capitalising on the traditional faster pace of inflation beyond
commercial real estate open market rents in the UK.
The possibility for continued higher inflation represents an
opportunity for the Company to generate superior income
driven returns for investors, given the inflation linkage in
the Group’s portfolio rent reviews and the long-term lease
arrangements. That said, without the mitigation factors that
the company has in place, levels of inflation that are currently
being experienced in the UK could, over the longer-term, cause
rents in the portfolio to grow to the point where they materially
exceed equivalent market rental values, as well as potentially
resulting in unsustainable rental growth for tenants or in
properties made less attractive to alternative operators due
toprofit erosion.
The portfolio is protected from this risk in anumber of
ways, including:
(i) capped and fixed rental uplifts giving the tenant
(andtheGroup) certainty of rental growth profile,
(ii) regularly entering into new leases at very low rents through
forward fundings and sale and leasebacks that provide
ahigher level of rent cover and are therefore better able to
withstand rental growth,
(iii) recycling of capital into new assets to refresh the portfolio
and maintain alow spread to market rents, and
(iv) focussing on well capitalised tenants with ahigh proportion
of freehold ownership and lower exposure to rents that are
better able to ride out such inflationary periods.
Financial results
Total accounting return
31 March 2023 31 March 2022
Total accounting return (10.7)% 18.2%
The Group’s total accounting return comprises income, through
dividends paid to shareholders, and capital returns, through
changes in EPRA NTA during the year. Asummary of the
dividends paid and EPRA NTA movement is given below.
EPRA NTA
31 March 2023 31 March 2022
EPRA NTA per share (ex-dividend) 121.1p 142.6p
During the year, the EPRA NTA contracted 15.1%, broadly
reflecting the outward shift in valuations during the year,
compounded slightly by the Group’s leverage.
Dividend per share
31 March 2023 31 March 2022
Dividend per share 6.30p 6.0p
In respect of the year, the Company has proposed dividends
totalling 6.30p per share. The dividend per share reflects an
increase of 5% on the previous half-year.
Total expense ratio
31 March 2023 31 March 2022
Total expense ratio (annualised) 0.9% 1.0%
Following the successful merger with Secure Income REIT plc,
anew lower investment advisory fee tier was introduced, and
incremental management fees are now charged at amodest
55bps (on market capitalisation above £2bn). The reported
TER includes only eight months of the enlarged Group post-
merger and we expect the efficiencies of scale achieved to be
demonstrated through further reductions in the total expense
ratio in the years ahead.
LXi REIT plc Annual Report 2023 13
Strategic Report GovernanceOverview Financial Statements Additional Information
Loan to value
31 March 2023 31 March 2022
Pro forma net LTV 37% 22%
In the medium-term, in line with our conservative leverage
policy, our LTV is expected to be maintained at approximately
30% which we expect to achieve through acombination of
active and selective disposals and through the general recovery
of the property sector. Current pro forma net LTV is well within
the Group’s borrowing policy cap of 40% and the Company
maintains significant headroom to all banking covenants.
Financing
The Group’s debt pool is secured against the majority of the
Group’s investment properties and comprises the facilities
listed below.
A summary of the facilities as at the year end, then subsequent
to our post year end refinancing are below:
Position as at 31 March 2023
Facility Lender Principal
Maximum
cost Maturity
Term loan Scottish Widows £55.0m 2.74% Dec 2033
Term loan Scottish Widows £40.0m 2.74% Dec 2033
Term loan Scottish Widows £75.0m 2.99% Dec 2033
New facilities in the year
Facility Lender Principal
Maximum
cost Maturity
Leisure facility HSBC
1
£60.0m 3.20% Jun 2023
Acquisition
facility
1,3
Barclays and
HSBC
£385.0m 4.81%
1
May 20242
Merlin B
Facility
1,2,3
Blackstone £53.0m
3
4.95% Mar 20262
Budget hotels 1
1,3
M&G £59.0m 2.71% Oct 2023
Budget hotels 2
1,3
M&G £65.4m 3.35% Apr 2023
RCF
3
Lloyds Bank
andRBSi
£102.0m 2.95% Aug 2024
Healthcare 1
1
L&G £63.1m 4.29% Sep 2025
Healthcare 2
1
AIG £292.5m 5.30% Oct 2025
£1,250.0m
Facilities repaid during the year
Facility Lender Principal
Maximum
cost Maturity
Merlin A facility Blackstone £232.0m 4.95% Mar 2025
Position after post year end refinancing
Facility Lender Principal
Maximum
cost Maturity
Term loan Scottish
Widows
£55.0m 2.74% Dec 2033
Term loan Scottish
Widows
£40.0m 2.74% Dec 2033
Term loan Scottish
Widows
£75.0m 2.99% Dec 2033
Leisure facility HSBC
1
£60.0m 4.55% Dec 2024
Healthcare 1
1
L&G £63.1m 4.29% Sep 2025
Healthcare 2
1
AIG £292.5m 5.30% Oct 2025
New facilities post year end
Facility Lender Principal
Maximum
cost Maturity
Long-term loan Canada Life £148.0m 5.75% March
2039
Syndicate loan A Lloyds, Barclays,
Santander
andRBS
International
£115.0m 4.15% Jan-2028
Syndicate loan B £250.0m 4.15% Jan-2026
Syndicate RCF £200.0m 5.87% Jan-2028
£1,298.62m 4.71% 6 years
We have continued to take aproactive and resourceful
approach to our refinancing, looking at alternative sources of
financing rather than just vanilla bank debt. In September, we
announced an income strip on the Group’s Thorpe Park and
Alton Towers assets. The 65 year income strip represented
30% of the annual rental income received from these assets to
aUK institution for £257m, reflecting an attractive net initial
yield of 2.96%.
There were two key material benefits behind this income strip,
firstly it was instantly earnings accretive as the proceeds were
used to pay down debt the Merlin A facility, which had a cost of
4.95% pa. Secondly, the impact of the unwind on the associated
hedging on the debt which was paid off raising £24m. This
funded the cost of the new hedging we put in place for the
second stage of our refinancing.
The next stage of our refinancing on 6 March 2023 was the
completion of an extension of an existing £60m HSBC loan
and the agreement of anew £148m 16-year term loan with an
institutional lender.
Investment Advisor’s report (continued)
1. Facilities were also new during the year as they arose as aresult of funding the acquisition of SIR or were existing SIR loans which LXi took on
2.. Loan principal was in Euros hedging the NAV and income exposure to Euro through the German asset. Translated to GBP at arate of 0.88 to the EUR
3. Facilities repaid post year end
14 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
We then completed our refinancing exercise in April 2023
with anew, £565m secured, interest-only debt facility with
asyndicate of major clearing banks comprising anumber of the
Company’s existing lenders.
We believe the fact that we have managed to refinance such
alarge volume of debt at attractive rates in achallenging
economic climate demonstrates the quality of our assets and
the robustness of our tenants.
The Group manages interest rate risk by either fixing (by way of
fixed rate facilities or swapping floating rates) or capping rates.
Fixing the rate of interest on these facilities gives the Group
long-term certainty over its ability to generate significant
growth in the generation of free cash flows as aresult of largely
collared index-linked and fixed rental uplifts, and the positive
effects of conservatively structured leverage. The Group
monitors the headroom on ICR covenants regularly and at
present reports significant headroom on all facilities.
The balance sheet is well positioned with pro forma net LTV
of 37%. As referred to above, our tightest covenant across the
Group’s secured facilities would require a30% reduction in
value to breach and the Group has significant unsecured assets
and cash to use if required before any remedial action is taken.
The LTV is within our agreed range but above our longer-term
target. If yields remain flat then this would result in a material
positive movement of the LTV to 35.5% in FY24 and 33.8%
in FY25. We remain committed to a conservative medium-
term LTV target of 30% and will continue to actively manage
down our LTV through disposals and value enhancing asset
management initiatives. The Investment Advisor continues
to receive significant unsolicited interest in the Company’s
high quality portfolio both for disposals and ‘income strip’
opportunities and expects to continue to selectively sell
assets where capital could be better allocated to enhance
shareholder returns.
Management resource
We are pleased to report the recent senior appointments
of Alex Short and Alex MacEachin, as part of our continuing
investment in resource and following the successful merger
and integration with Secure Income REIT. Alex Short, appointed
as Chief Investment Officer, has over 20 years’ industry
experience, having held senior roles at leading real estate
businesses, including AEW and UBS. Alex MacEachin, appointed
Finance Director, has extensive experience of property and
construction finance and accounting matters, including most
recently as Group Financial Controller of Empiric Student
Property PLC.
Rob Ward as Head of Real Estate, is a qualified Chartered
Surveyor with more than 15 years’ experience in commercial
property. Most recently at Prestbury, helping to launch and
manage Secure Income REIT through to its merger with LXi in
2022. Stacey Wood has been appointed as Financial Controller.
Stacey is a Chartered Certified Accountant (ACCA) with more
than 12 years direct experience in the commercial property
sector, most recently at Prestbury, helping to manage Secure
Income REIT from the time of its listing through to its merger
with LXi in 2022.
During the year we also appointed, Alissandra Cooke as General
Counsel. Previously Alissandra practised as a solicitor for 9
years at City law firm, Travers Smith LLP. She has significant
experience advising cross-sector property funds, developers
and operators on a broad spectrum of real estate matters.
Barbora Melezínková was appointed Head of ESG. Previously,
Barbora was a Senior Asset Manager on LGIM Real Assets’
long income funds with dedicated focus on ESG strategy and
implementation. Barbora is a qualified Chartered Surveyor with
over 12 years of experience.
LXi REIT plc Annual Report 2023 15
Strategic Report GovernanceOverview Financial Statements Additional Information
Outlook
The successful merger has created aplatform from which
we aim to grow the Group even further, leveraging our scale,
experienced management team, liquidity and low cost base.
We see a number of opportunities such as assets coming out of
open-ended funds due to redemptions, a number of corporate
bonds are coming to maturity meaning they will need to find
alternative sources of funding such as sale and leasebacks. The
most significant opportunity we see is further M&A activity
in the REIT market. There are a large number of mid-market
generalist REITs which do not have the same access to capital,
liquidity and low cost base which LXI does. We believe we have
shown the material tangible benefits of which a merger can
achieve with the SIR plc.
The Government and Bank of England believe they have more
certainty over inflation over the near term, with inflation
expected to return to more normal levels by the end of the year.
The impact of inflation for the Group’s rental income is positive,
given the portfolio’s rent review linkage to UK inflation (26%
RPI, 38% CPI). We are, however, cognisant of the potential
impact that current levels of inflation could have on the wider
economy. This may also be an impact on the prospects of our
tenant operators but they can be managed by the rent review
caps to the mutual benefit of the Company and its tenants.
The interest rate rises used to combat inflation have meant that
property values in the UK have been impacted as was shown
in the Group’s valuation yield shifting to 5.4%. There are signs
that the bottom of this value cycle has been met with the CBRE
monthly index shows arise (0.6%) in capital values for first time
since the repricing last year.
The Group has continued its progressive dividend growth,
we have announced adividend of 6.6p for the year to
31 March 2024, this is an increase of 5% on the year before and
we expect it to be fully covered by our cash adjusted earnings.
Our focus remains to:
• protect and enhance shareholder value through accretive
recycling of capital, asset management initiatives and
maintaining avery long WAULT and diversification
• reduce leverage through selective disposals, active asset
management and capital recycling, to improve balance sheet
strength and protect progressive income returns
• continue to build abusiness which has the ability to
growusing innovative strategies to provide market
leadingreturns to our shareholders
For and on behalf of the Investment Advisor
Simon Lee Frederick Brooks
Director Director
LXi REIT Advisors LXi REIT Advisors
6 June 2023 6 June 2023
Investment Advisor’s report (continued)
16 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Statement
As aresult of the UK’s legally binding commitment to reach Net
Zero by 2050, the property investment industry is now at the
point of universally recognising the need for deep integration of
environmental sustainability considerations into the strategy of
any successful property portfolio.
Real estate investors have been linking buildings’ wellbeing
credentials and wider social value creation to successful
financial performance for quite some time now, and there is
plenty of evidence that companies with strong diversity, equity
and inclusion ethos and emphasis on employee wellbeing
report stronger business performance.
As aresult of appreciating these relationships between
responsible investment practices and value creation and
preservation, the Board of Directors and the Investment
Advisor recognise our responsibility to manage risk and add
value through the integration of ESG considerations into all
areas of the business.
This report has been prepared in accordance with the EPRA
Sustainability Best Practice (sBPR) recommendations on
Sustainability Reporting. The report outlines progress made
against previously set targets and introduces new goals for the
future as our strategy continues to evolve.
This report contains the following information:
• ESG goals and focus areas
• Year in review: key highlights and progress
• Disclosures in line with the Task Force on Climate-related
Financial Disclosures (TCFD)
• Carbon Emissions and Energy Performance Certification
• Social and Community Engagement
• Governance
• EPRA Sustainability Performance Measures and the Global
Reporting Initiative
ESG goals and focus areas
As ESG continues to rise in prominence in line with our
stakeholders’ demand for sustainable investments and with the
UK’s on-going focus on decarbonisation and social outcomes,
we have continued to build on our successful work to date by
articulating acomprehensive ESG strategy for the fund with
aspecific pathway to delivery and aset of measurable KPIs to
help us monitor progress.
Our approach reflects the unique nature of our leases, and our
occupiers’ long-term commitments to the sites in our portfolio.
With weighted average unexpired lease term at 27 years, a large
proportion of current occupiers will still be in our buildings by
2050 and many will want to extend beyond this point given
the strategic importance of the sites to their businesses. They
are fully committed to on-going upkeep of the properties
through the FRI leases and the vast majority have their own
commitments to reduce own Scope 1 and Scope 2 emissions,
which include building energy usage, to Net Zero levels ahead
of 2050. The Company’s operational Scope 1 & 2 emissions
make up approximately 0.2% of the total, with the remainder
generated by tenants. Our strategic goals and the plan for their
delivery is therefore centred around supporting occupiers with
the delivery of their own decarbonisation plans, including the
financing of any larger capex projects in ways that generate
additional income for the Company. Net Zero Carbon: Principles
of energy hierarchy, as defined by the Better Buildings
Partnership, have been followed in developing our net zero
carbon pathways, to ensure effort is focused first on reducing
energy demand and improving energy efficiency before looking
to renewable energy sources and offsets.
The LXi REIT ESG Strategy and Net Zero Pathway document can
be found on our website and additional detail on key goals and
metrics is covered later in this section of the report.
The merger with Secure Income REIT Plc in July 2022 resulted
in achange to portfolio profile, bringing with it anew range of
operational real estate, new tenants and anew set of risks and
opportunities from an ESG perspective.
There is now increased opportunity to add value through
improving buildings’ environmental performance in
collaboration with our occupiers, as much of the building stock
coming in from the Secure Income REIT is older in nature.
Our new top three largest occupiers, accounting for 55% of
contractual rent roll, each have ambitious decarbonisation
targets and have been extremely responsive to collaborating
with us on decarbonisation plans for their sites within our
portfolio. The same is true for the remainder of the top 20 and
many of the smaller organisations making up the rest of the
occupier base.
Environmental, Social and Governance
LXi REIT plc Annual Report 2023 17
Strategic Report GovernanceOverview Financial Statements Additional Information
A high-level summary of delivery against previously set goals, alongside arefreshed set of forward-looking objectives in line with
our ESG strategy is as follows:
Short-term initiatives (12-18 months from March 2021) Longer-term goals (three plus years from March 2021)
Obtain first GRESB rating on the portfolio
(September2022)
Completed To continue to integrate climate-related matters
into the Company’s investment process
Ongoing
Obtain first EPRA sBPR rating (September 2022) Completed To develop aroad map to deliver ascience-based
carbon neutral target for the business
Completed
Instruct decarbonisation reports on afurther,
pre-established tranche of assets (March 2023)
Completed To provide investors and our wider stakeholder group with
relevant and comparable disclosure relating to ESG matters
Ongoing
Move all energy provision in landlord-controlled areas to
suppliers that provide green tariffs (September 2022)
Completed To achieve EPC ratings on all assets which of A or
B by 2030 as they come up for reletting.
Ongoing
Recruit for the role of Head of ESG Completed
Stringent ESG due diligence across all new purchases,
including requirements for green provisions in leases
Completed
Improve tenant engagement in providing emissions data to
improve on our Scope 3 emissions reporting (March 2023)
Ongoing (coverage
doubled for 2022 vs 2021)
Strategic goals to 2025: Supporting occupiers’ development of specific
asset-level environmental and social strategies
Strategic goals to 2030 and beyond: Delivery of decarbonisation initiatives
in collaboration with occupiers
Portfolio Scope 3 emissions (tenant energy consumption)
coverage by floor area: 2023: 75% | 2024: 85%+
Asset-level decarbonisation audits roll-out: 2023: 15% to have
reduction plans in place by year end | 2024: 30% | 2025: >50%
Social value focus: Complete scope assessment in 2023
Biodiversity enhancement: Pilot and roll-out plan in 2023
Delivery of decarbonisation initiatives in collaboration with occupiers
Portfolio has the potential to achieve a30% CO
2
emission
reduction by 2030 off a2022 indicative baseline
Portfolio targeting operational Net Zero no later than 2050, in line with the UK’s
legally binding target and reflective of the long-leased nature of our assets
Year in review: key ESG highlights and progress
We have made significant headway this year in consolidating
our strategy, including setting the ultimate operational Net
Zero target of no later than 2050, developing aclear set of
KPIs to monitor implementation, enhancing our disclosures
and making astart on forming approaches to biodiversity
enhancement and social value creation.
Investment strategy
• Building on the materiality assessment completed in
2021, we have developed acomprehensive ESG strategy,
incorporating apathway to aNet Zero portfolio in operation
no later than 2050.
• Standard investment acquisition due diligence ESG
requirements have been enhanced beyond EPC ratings,
construction certification and Net Zero audits, to include
forward looking climate risk assessment, green clauses in
leases and anumber of social impact and wellbeing criteria.
Sustainability Reporting
• During the year, the Group’s investment manager has moved
its sustainability reporting function in-house, establishing
full ownership and detailed understanding of all our
portfolio and corporate emissions and energy intensity data
under a well qualified individual with extensive experience
in both surveying and ESG. We have developed adetailed
Company ESG Dashboard monitoring over 30 individual ESG
metrics covering data at the individual property-level, as
well as monitoring our occupier engagement activity.
• We continue to report in alignment with all 11
recommendations of the TCFD, and strive to gradually
enhance our approach to scenario analysis. TCFD training
is now also astandard requirement for any staff of the
Investment Advisor directly or indirectly involved with
climate-related reporting.
Tenant engagement/asset management initiatives
• As aresult of afocused campaign to engage with senior
managers responsible for property, ESG and energy
management within our largest occupier organisations, we
now have direct ESG dialogue with 19 of our top 20 tenants.
Occupier energy consumption coverage for the portfolio
doubled to 62% for the 2022 calendar year resulting from
awider engagement effort on data sharing.
• The next stage of engagement involves identifying where the
Company as landlord can add the most value in supporting
occupiers with their ESG journey through for example
assisting with site-level Net Zero audits, teamingup
on social impact initiatives or deploying further return
generating investment into existing sites.
• We are progressing the roll-out of solar PV installation
across four sites totalling 3 MW of capacity, and are in
conversation with occupiers across seven further sites
aboutPPA opportunities.
• Installation of EV charging points is currently being
progressed across five sites in the portfolio.
Environmental, Social and Governance (continued)
18 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Portfolio improvements
• Following the merger with Secure Income REIT, adetailed
EPC audit identifying assets requiring EPC assessments
and renewals has been carried out and we are progressing
towards having the portfolio fully rated as soon as possible.
Of the total 160 SIR properties, 144 (90%) now have arating
and we are working towards having the remaining 16
assessed as soon as possible.
• We are working with apanel of major UK Net Zero
consultants to create astreamlined Net Zero audit format
suitable for long FRI-leased properties which will cover
both apathway to NZ in operation and EPC improvement
recommendations while adjusting the timing of proposed
interventions to occupiers’ planned maintenance
programme timeline. Once this is finalised, these audits will
be rolled out across priority sites where occupiers have not
yet commissioned their own audits.
• All landlord-procured electricity in the portfolio is now on
renewable energy tariffs.
• 35% of leases by rent roll now benefit from green provisions,
with conversations on-going across afurther 19% to explore
incorporating green clauses.
• The clearance and planting stage of abiodiversity
enhancement pilot has been successfully delivered across
the landlord-controlled landscaping sections of Columbus
Retail Park in Andover. Once fully established the new
vegetation will deliver aBNG (Biodiversity Net Gain) of over
+200% against the baseline, with an estimated commercial
offsetting value of between £4k and £6k. While the nominal
offsetting value is negligible, it covers the cost of carrying
out the exercise and, crucially, aggregating BNG benefit
across the wider portfolio once further initiatives are rolled
out has the potential to make atangible difference to UK
biodiversity and ecosystem resilience more widely.
Task Force on Climate-related Financial Disclosures (“TCFD”)
We have made voluntary disclosures in line with all 11 TCFD recommendations and are continuously refining the quality of our
reporting. The Company became an official supporter of the TCFD in 2022, joining more than 2,000 organisations in demonstrating
a commitment to building a more resilient financial system and safeguarding against climate risk through better disclosures.
Further disclosure enhancements are planned, with immediate focus on increasing Scope 3 data coverage, embodied carbon
measurement approach and scenario analysis development.
Governance
a. Describe the Board’s
oversight of climate-related
risks and opportunities.
Climate-related strategy has been astanding agenda point for the Board since May 2021. This facilitates reporting on
aquarterly basis directly to the Company’s Board of Directors on the implementation of the Group’s climate risk strategy.
Climate-related risks continue to be firmly integrated into strategic, investment and operational decisions made. This has been
achieved by, among other process enhancements, updating the format of Board reporting on acquisitions to include sustainability-
related matters that are aligned with our ESG policy. The acquisition process also includes instructing decarbonisation reports for
all assets that have EPC ratings lower than aB, with the aim of identifying specific risks and opportunities of potential assets.
The Board oversees and monitors the ESG strategy and progress towards approved ESG goals and targets on aquarterly basis.
Data on progress against KPIs is collated into quarterly reports by the Head of ESG, utilising the ESG dashboard which is updated
onan on-going basis including input from the wider team.
b. Describe management’s role
in assessing and managing
climate-related risks and
opportunities
Representatives from the Investment Advisor and the Board of Directors came together to form the Company’s Climate Risk
Working Group (CRWG) in 2022. This Group makes recommendations to the Board regarding climate-risk and is co-chaired by the
Chairman of the Board and the Advisor’s recently appointed Head of ESG.
The CRWG aims to meet aminimum of once aquarter to assess implementation of the strategy and reports directly to the Board
ofDirectors at each quarterly Board meeting.
Strategy
a. Describe the climate-related
risks and opportunities
identified by the organisation
over the short, medium and
longer-term
To adopt an informed approach to climate risk and opportunity assessment, the Investment Advisor worked with an external
consultant in 2021 to establish a hierarchy of materiality of ESG factors to Lxi’s internal and external stakeholders.
The following climate-related areas were identified as most material:
• Energy efficiency & CO
2
emissions reduction
• Supplies of clean, renewable energy
• EPC and MEES compliance
• Effective risk management and pre-acquisitions due diligence
• Undertaking affordable improvements
• Building adaptability & resilience
This served as the initial building block from which a more comprehensive risk matrix was
developed by the Climate Risk Working Group, as summarised in table below.
LXi REIT plc Annual Report 2023 19
Strategic Report GovernanceOverview Financial Statements Additional Information
Strategy
Short term
(12 months): financial year cycle
Medium-term
(up to 3 years): business planning and
budgetingcycle
Long-term
(3+ years, out to 2050, capturing the timeframe
overwhich leases and other material
arrangements, such aslong-term loans, expire)
Risks Opportunities Risks Opportunities Risks Opportunities
Legislation
MEES No immediate risks from
MEES legislation as the
portfolio does not hold
any assets with EPCs
below E in England and
Wales.
Obtaining any missing
assessments ahead of
time will enable us to
work on any required
improvements well in
advance of the planned
2027 & 2030 MEES
deadlines
Any properties without
an EPC in place by April
2025 would be in breach
of legislation
Collaborating with
tenants to carry
out any required
works to improve
EPCs in amanner
aligned with their
own decarbonisation
programme and
planned maintenance
will put the portfolio in
astrong position, and
we would expect to see
yield compression and
improved rental levels
on higher rated assets.
Due to the proposed
MEES requirements
of C by 2027 and A/B
by 2030, there is arisk
that leaving works
too late could result
in increased costs for
tenants of works nearer
the time due to demand
for materials and
contractors
The sooner we can
work with tenants to
upgrade properties
rated C or below, the
more of acompetitive
advantage we can
get. However, this
needs to be balanced
with the outlook for
automatically improved
performance thanks to
grid decarbonisation.
Mandatory
business
transition
planning
The UK is moving towards making the publication of transition plans mandatory, as announced at
COP26 (2021) by Rishi Sunak. The consultation period just finished earlier this year, but the FCA already
introduced recommendations for listed companies and large regulated asset owners to disclose transition
plans as part of TCFD from 2023. This presents agreat opportunity to refine strategy and set specific
targets and KPIs, which we are fulfilling through the recently completed Net Zero Pathways work,
butthere are also reputational risk associated with non-compliance / inadequate disclosures.
Policy
transition
risks
It is very likely that MEES is just astart of legislative requirements relating to building decarbonisation, and that these, along with Carbon taxation, will get
more specific and stringent as time progresses towards the UK’s 2050 Net Zero target. This is supported for example by the recently published independent
review of the Government’s Net Zero strategy, as well as by the emergence of best practice standards such as the currently on-going UK Net Zero Carbon
Building Standard initiative (which will set out performance targets for operational energy and embodied carbon aligned with a1.5ºC pathway, and in our view
will be pivotal in guiding future policy), or the fairly recent move by an increasing number of local authorities to require whole-life Carbon assessments as
aplanning prerequisite.
Market
Preference
for
sustainable
assets
Brown discount: risk mitigation through occupier engagement on improvements; Green premium: at least athird of the portfolio likely to benefit. Although the
outlook is uncertain, we believe thepolarisation is likely to continue getting more pronounced as time progresses.
Investor
preference
Misalignment with existing & new shareholder preferences could restrict investment and negatively impact share price, while ensuring interests are aligned
presents opportunities. One way to more clearly demonstrate the portfolio ESG profile in the near future will be through the FCA’s SDR labelling, due to come
into force in 2024.
Environmental, Social and Governance (continued)
20 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Strategy
Short term
(12 months): financial year cycle
Medium-term
(up to 3 years): business planning and
budgetingcycle
Long-term
(3+ years, out to 2050, capturing the timeframe
overwhich leases and other material
arrangements, such aslong-term loans, expire)
Risks Opportunities Risks Opportunities Risks Opportunities
Access
to finance
Our new Facility
Agreement is “SLL
ready”, meaning we
have agreed with our
lenders in principle to
add sustainability-linked
criteria into the FA,
resulting in a+/-5bps
adjustment to Margin
based on achievement of
the agreed Sustainability
Performance Targets
(SPTs). We will work
closely with our
lenders to develop an
appropriate set of SPTs
over the 12 month period
to April 2024, with the
view to convert the debt
to fully Sustainability-
Linked at that point.
Criteria for accessing capital likely to become more stringent over the longer term, but this will present
the opportunity to access better rates on borrowing if criteria are met.
Risks to tenant
businesses
Risks: Supply chain shortages, restricted access to utilities, energy pricing, carbon pricing; Opportunities:
increased revenues from sales of sustainable products and services. These risks and opportunities are
likely to become more pronounced as time progresses. We continue to monitor developments at asector-
level and ensure the portfolio is positioned appropriately.
Physical risks
Flooding Over the short and medium term, there is arisk of physical damage to real estate as aresult of
immediate environment-related factors such as floods. To date, the Company has not purchased any
asset with a‘high’ physical risk on acquisition, however as assets are owned for alonger period of time
we recognise the need to re-assess this. We are currently reviewing options of the most appropriate
forward-looking physical risk modelling tools for the portfolio.
Over the longer-term, assets may become more
greatly exposed to physical risk from extreme
weather events and therefore no longer be viable
to tenants. Forward-looking modelling tools
become even more relevant over this longer
timehorizon.
Other
extreme
weather
events
b. Describe the impact of
climate-related risks and
opportunities on the
businessmodel, strategy,
andfinancial planning
We believe climate risks pose material financial risks if not appropriately managed; however, we have integrated the following
processes to ensure any risks are appropriately foreseen, monitored and mitigated:
Acquisitions – During the acquisition process, we look to assess the true cost of apotential purchase and how we can transition it to
anet zero carbon pathway, including the eventual adoption of higher EPC standards. The Group have instructed Zero Carbon reports
on all acquisitions with EPC ratings below aB, and forward-looking climate risk is now included as aDD requirement.
On-going asset management – focus is on tenant engagement and collaboration on asset decarbonisation, including further
investment opportunities for the Group in line with the detailed ESG strategy. The investment team has afortnightly meeting with
the Head of ESG to ensure initiatives are progressing in line with targets.
Financial planning – Given the long, triple-net lease structures in the Group, property improvement costs towards the Net Zero
transition generally sit with the occupiers. We are budgeting predominantly for ancillary consultancy costs, associated with
supporting our occupiers with the delivery of their Scope 1 & 2 site level emission reduction plans. Providing this support is crucial,
as occupiers’ successful delivery of their decarbonisation goals ultimately translates into our successful delivery of our ultimate
Scope 3 target. We continue to monitor the need to include the cost of EPC improvements in our financial appraisals and forecasting.
For example, we have instructed the first tranche of decarbonisation reports on high value assets with poor EPC ratings to
determine the estimated capex costs of carrying out improvements. This may in time need to be factored into our financial planning
as we could be expected to share some of the capex costs with tenants. The Investment Advisor’s Head of ESG, the Company
Secretary, corporate lawyers and other third parties continue to keep the Company abreast of any changes in legislation, enabling us
to remain ahead of compliance and take a forward-view.
Access to capital – Our climate risk strategy is designed to ensure we meet appropriate sustainability credentials so we can continue
to access debt and equity and partner with lenders at low cost. We are planning to manage the risk associated with access to capital
by providing investors and other stakeholders with relevant and comparable ESG metrics and disclosures. The Investment Advisor
communicates regularly with the Company’s shareholders to understand their changing parameters and requirements and to ensure
we continue to meet their expectations when it comes to sustainability and climate-related matters.
LXi REIT plc Annual Report 2023 21
Strategic Report GovernanceOverview Financial Statements Additional Information
Strategy
c. Describe the resilience
of the organisation’s
strategy against different
climate-related scenarios
e.g., different impacts on
infrastructure at higher
future temperatures,
including a2⁰C or
lower scenario.
We recognise that climate change poses material risk to our business, both directly and indirectly. As part of our strategic evolution,
we are committed to transparently addressing the transitional and physical risks and opportunities relevant to the Group.
We are at the initial stages of carrying out quantitative scenario analysis for the portfolio. As astarting point, we have considered
the Intergovernmental Panel on Climate Change (IPCC)’s latest SSP-RCP scenarios and developed amatrix assessing key risks and
opportunities to the portfolio under each scenario, taking the following key factors into consideration over short, medium and long
term horizons:
Transitional/structural: market & technology shifts (structural demand changes to property sectors and likelihood of tenant
business resilience), pressure on tenants’ supply chains, energy prices, policy shifts, impact on property values & stranding risk, and
reputation
Physical: physical risk to buildings from extreme weather events
IPCC scenarios: change in global surface temperature vs. 1850-1900
Source: Sixth Assessment Report of the IPCC Working Group I, 2021
Under the two warming-limiting scenarios (SSP1-1.9 & SSP1-2.6), the most significant risks and opportunities will come from
continued consumer demand shift for sustainable products and services, policy shifts (e.g. increasingly stringent building standard
requirements, carbon pricing) and resulting impact on property values in the form of green premia and brown discounts.
There is already increased attention in the market on assets’ ability to adhere to pathways to Net Zero emissions in line with limiting
the Earth’s warming to well below 2°C as per the Paris Agreement, measured through tools such as CRREM. Underperforming these
benchmark pathways will increasingly result in direct impact on valuation as factoring in the costs of remediation becomes market
standard.
Under the three higher warming scenarios (SSP2-4.5, SSP3-7.0 and SSP5-8.5), the most significant risks and opportunities to the
portfolio would emanate, to varying degrees depending on the scenario severity, from physical risks to the properties. The outcome
would depend on our ability to avoid (through stock selection and trading) and eliminate (through asset improvements) physical
risks to the properties, as well as our ability to maintain atenant mix with robust business longevity even under these challenging
physical risk scenarios.
These physical impacts may include “acute” physical damage from variations in weather patterns (such as severe storms, floods,
drought and over-heating) as well “chronic” impacts such as sea level rise.
Although all of our leases are Full Repairing and Insuring leases, meaning for the duration of the tenancy the tenant is responsible
for all repair and upkeep with regulatory standards, we recognise potential financial impacts on our tenants could in turn impact
theGroup through tenant default or forced vacancy. Indeed, our tenants may be financially impacted by physical risks in the
following ways:
• Reduced revenue from decreased production capacity and increased business disruption (e.g. supply chain interruptions,
damages to production sites, transport issues etc.)
• Reduced revenue from lower sales
• Write-offs of stock or assets (e.g. due to damage to buildings or equipment)
• Increased costs required for health and safety or to repair damage
• Increased insurance premiums on assets that are considered ‘high’ physical risk
This will in turn have direct impacts on the Company. For example, assets that become difficult to rent or lay vacant due to tenant
default may require rent-free periods or concessions and valuations are likely to be adversely affected for assets exposed to more
frequent or extreme weather-related events. The Company mitigates this by maintaining strong relationships with its tenants to
ensure both parties are informed of risks. It also continues to carry out appropriate due diligence on all new acquisitions so that
potential risks are identified at an early stage; and the potential financial impact is considered in financial projections.
To date, the Group has not acquired an asset classified as having a‘high’ physical risk as per XDI’s assessment framework. However,
we recognise the need to re-assess and monitor exposure to physical risks to reflect new climate science and forecasts.
We are currently reviewing options of the most appropriate forward-looking physical risk modelling tools for the portfolio.
Environmental, Social and Governance (continued)
22 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Risk Management
a. Describe the organisation’s
processes for identifying and
assessing climate-related risks.
In addition to the risk management approaches outlined under Strategy (b), the following key Climate risks are monitored through
on the Company’s principal risk register.
• Valuation risk
• Access to capital
• Regulatory risk
These sit on the register alongside all other key organisational risks such as micro- and macroeconomic, property-specific,
operational and compliance risks and are treated as equal priority.
Responsibility for identifying, assessing and managing climate-related risks, both those on the principal register and the more
detailed risks in Strategy (b) which are monitored on an on-going basis, are delegated to the Climate Risk Working Group (CRWG)
– under the direct oversight of the Board and which includes Board members. The CRWG continually evaluates key risks (which
includes sustainability/climate change related risks), the effectiveness of existing controls and identifies where further mitigation
measures might be required. For example, this approach led to the inclusion of climate considerations within the acquisition and due
diligence process.
Time horizon/urgency, potential impact magnitude, likelihood of occurrence and level of direct control over the management are all
taken into account when making decisions on the priority and management of risks.
Transition Plan: The Net Zero Pathway to 2050, developed through our work with Carbon Intelligence, identifies stranding risks and
guides us towards asset management plans aligned with Science-Based Targets.
The Company’s application for membership of the Better Buildings Partnership in January has been successful, and LXi REIT has been
enrolled as afull member from April 2023 allowing the Group to contribute to leadership in sustainability best practice as well as to
access the latest research, and the support of its wider membership base.
b. Describe the organisation’s
processes for managing
climate-related risks.
c. Describe how processes for
identifying, assessing, and
managing climate-related
risks are integrated into the
organisation’s overall risk
management.
Metrics and Targets
a. Disclose the metrics used by
the organisation to assess
climate-related risks and
opportunities in line with
itsstrategy and risk
management process.
In line with the Group’s Net Zero pathway, the following are our ultimate metrics for monitoring on-going progress:
• Delivery against asset-level decarbonisation plans (Scope 1, 2 & 3)
• CO
2
e emissions & year on year emission reductions
• Building Energy Usage Intensity (EUI) reductions
• Monitoring and mitigation of building-specific physical climate risk
However, we have also established aset of more detailed core KPIs, developed based on regulatory requirements, disclosure best
practice, conversations with key investors, industry standard approach to metrics, and work with the investment team.
We now have an ESG KPIs dashboard in place which is updated on aregular basis and helps us keep track of progress against targets.
This core set of metrics provides good coverage, satisfies investor and disclosure framework requirements, and forms agood
feedback loop for keeping the CRWG and the Board updated on progress.
Short term KPIs (updated on an ongoing basis and monitored quarterly):
• Occupier utility consumption data coverage
• Occupier engagement
• Occupiers’ own targets and progress
• % Decarbonisation plans for buildings completed (Scope 1, 2 & 3)
• EPCs
• On-site renewable energy generation capacity
• Green lease provisions
b. Disclose Scope 1, Scope 2,
and, if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the
relatedrisks.
Later in this report, we provide disclosure of our Scope 1, 2 and selected Scope 3 emissions. We arrange our GHG emissions reporting
in line with the Greenhouse Gas (GHG) Protocol Corporate Accounting and Reporting Standard. Our relevant emissions categories
include fuel and energy related activities, business travel, water use and emissions from downstream leased assets (tenant
emissions) where data is available.
In 2022, we doubled our occupier energy usage data coverage vs 2021, to over 60% by floor area.
c. Describe the targets used by
the organisation to manage
climate related risks and
opportunities and
performance against targets.
As a way to ultimately manage the portfolio transition to a low carbon economy, the overarching target of operational Net Zero no
later than 2050 has been set, in line with the UK’s legally binding target and reflective of the long-leased nature of our assets.
Short term targets (to 2025, from a 2022 indicative base)
Occupier energy usage coverage: 2023: 75% | 2024: 85%+
Asset-level decarbonisation audits roll-out: 2023: 15% to have reduction plans in place by year end | 2024: 30% | 2025: >50%
Social value focus: Complete scope assessment in 2023
Biodiversity enhancement: Pilot and roll-out plan in 2023
Medium to long-term targets (to 2030 and beyond)
Delivery of decarbonisation initiatives in collaboration with occupiers
Portfolio has the potential to achieve a30% CO
2
emission reduction by 2030 off a2022 indicative baseline
The CRWG reviews progress against approved short-term actions needed to achieve each longer-term goal and adapts these
toensure continuous improvement.
LXi REIT plc Annual Report 2023 23
Strategic Report GovernanceOverview Financial Statements Additional Information
Carbon Emissions and Energy Performance Certification
Energy and carbon performance data – headline figures
Landlord emissions continue to make up a negligible portion of the portfolio.
Total like-for-like emissions EPRA sBPR 302-1 increased +3% for calendar year 2022 vs 2021, with the increase in like-for-like Scope
3 tenant utility usage (driver of 99.9% of the portfolio’s operational emissions) significantly more pronounced vs the increase in
emissions themselves: +13% growth in electricity and +5% in fuel consumption.
This was predominantly driven by the following factors:
• Businesses returning to full time operations following pandemic-related closures in the previous year
• Considerable increase in fuel consumption EPRA sBPR 302-1 Fuel-LfL by the hospitals in the portfolio: due to the return from
the pandemic to private healthcare. We will review and gain further details around this increase from the occupier
• Increased electricity usage EPRA sBPR 302-1 Elec-LfL by some of our largest industrial occupiers due to increased demand for
goods produced at their sites within our portfolio. Thorough energy audits and assessment of energy optimisation potential are
high on our agenda.
• Last winter was milder vs the previous year, supporting alower increase in overall fuel usage EPRA sBPR 302-1 Fuel-LfL
While overall it is good news that continued decarbonisation of the UK electricity grid is being reflected in lowered emissions
relative to the actual increase in energy consumption, these headline figures underline the fact that we must continue to urgently
press on with helping our occupiers improve their sites from an energy efficiency perspective.
A more detailed emissions breakdown, including market segment analysis, is provided in the EPRA sBPR appendix on page 28.
Emissions
2021 2022
Emissions
scope
Consumption
(kWh/m
3
/miles)
Emissions
(tCO
2
e)
Consumption
(kWh/m
3
/miles)
Emissions
(tCO
2
e)
Landlord procured gas and refrigerants 1 – – 0 –
Landlord procured electricity 2 60,006 12.7 491,688 95.1
Occupier gas consumption 3 94,442,995 17,298.2 113,058,671 20,637.7
Occupier electricity consumption – grid (location-based) 3 108,292,863 22,993.8 131,810,010 25,489.4
Occupier other fuels consumption 3 1,650 0.4 4,889,268 1,045
Downstream services (Investment Advisor’s emissions)
Gas consumption (office) 3 2,825 0.5 3,554 0.6
Electricity consumption (office) 3 15,592 3.3 8,019 1.6
Water consumption (m
3
, office) 3 20 – 31 –
Business travel (miles) 3 19,295 5.1 9,337 0.7
Total annual emissions 40,314 47,270
Total like-for-like emissions 38,844 40,190
Like-for-like change +3%
Environmental, Social and Governance (continued)
24 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
1 Data notes
Reporting period The energy and carbon emissions data presented here is for the reporting period 1 January 2021 to 31 December 2022 and for the
comparative period spanning 1 January 2020 to 31 December 2021. The time periods do not align to our financial year due to the timing
lag around availability of data.
Reporting method We arrange our GHG emissions reporting in line with the Greenhouse Gas (GHG) Protocol Corporate Accounting and Reporting Standard.
Grid electricity emissions are reported on the location-based method, as well as providing market-based calculations for reference,
reflecting the reduced emissions from purchasing of renewable electricity
This reflects the fact that the location-based approach reports on what the company is physically putting into the air, and while it is
useful to show emissions the company is responsible for through its and its occupiers’ purchasing decisions such as arenewable
energy contracts for comparison, we see the disclosure of our physical emissions as the most relevant.
Carbon scope and
reporting boundaries
Boundary: We have elected to adopt the Operational Control approach as defined by the GHG Protocol. As Scope 3 emissions are
outside of our direct control, we do not deem estimation of usage and emissions to be appropriate as the currently available
benchmarks are very generic in their nature and therefore could result in significant under- or overestimation of usage. Properties
where no tenant utility consumption data was obtained are therefore excluded from the reported usage and emission figures.
Electricity usage data was obtained from occupiers across 67% of assets by floor area, with 57% coverage obtained for gas usage and
34% for water.
Scopes: We organise our emission scopes in line with the Better Buildings Partnership’s Climate Commitment Carbon Scope. This means:
• Corporate emissions are not included within the scope as the focus is on real estate investments and these emissions are not
significantly material. However, we are choosing to voluntarily include emissions associated with operational activities of the
external Investment Advisor under Scope 3, downstream purchased services, in our target scope for complete transparency.
• Scope 1 covers landlord purchased fuels and refrigerants, of which the portfolio has none.
• Scope 2 covers landlord purchased electricity.
• Scope 3 covers tenant purchased energy and refrigerants, landlord purchased water and landlord managed operational waste.
• In future, we aim to include additional sources of Scope 3 emissions relating to forward-funded development of new buildings and
emissions from the activities of contractors and other suppliers, for which data is currently not available.
Assumptions and
estimates made
We are reporting actual energy consumption data only. The only estimates made are to bridge gaps in billing by considering the actual
usage billed divided by the number of months covered, multiplied by the number of months without data.
The Investment Advisor’s office emissions have been apportioned as 5% of the total office emissions (based on number of employees
employed by the Investment Advisor)
Theme parks are excluded from data coverage by floor area, due to the idiosyncratic nature of these properties’ layouts
• Investment Advisor Team business travel: company cars of the core investment team are now all electric, which is reflected in
reduced business travel emissions
Emissions factor
source
Conversion factors used from HMRC: https://www.gov.uk/government/collections/government-conversion-factors-for-company-reporting
Carbon Footprint’s residual factors were used for market-based electricity emissions calculations: https://www.carbonfootprint.com/
docs/2023_02_emissions_factors_sources_for_2022_electricity_v10.pdf
LXi REIT plc Annual Report 2023 25
Strategic Report GovernanceOverview Financial Statements Additional Information
EPC analysis
In this section we present the Group’s current EPC ratings as of 31 March 2023 as per the public EPC register, weighted
by passing rent.
Of the rated portion of the portfolio in England and Wales, 69% of assets are rated C or better; 31% are rated D or below. This
reflects the age of the former Secure Income REIT building stock and presents the portfolio with asignificant opportunity to add
value through collaborating with occupiers on EPC improvements and further decarbonisation initiatives. 6% of properties are in
Scotland and thus not subject to MEES, 2% are exempt due to the nature of the structures and there is still 32% of the portfolio
yet to be assessed when weighted by passing rent; however, this is limited to just 20 assets in total (6% of portfolio by number of
properties) with ahigh passing rent concentration.
% EPC by sector, weighted by passing rent: rated assets in England & Wales
A B C U/C
1
A to C D E F G
D and
below
9.4% 25.8% 32.8% 1.4% 69.4% 21.9% 8.7% 0.0% 0.0% 30.6%
Healthcare 0.1% 2.5% 1.4% 0.0% 4.0% 1.2% 0.0% 0.0% 0.0% 1.2%
Hotel 0.9% 5.8% 8.2% 0.0% 14.9% 13.3% 4.2% 0.0% 0.0% 17.5%
Theme Park 0.0% 4.0% 10.8% 0.0% 14.8% 0.0% 0.0% 0.0% 0.0% 0.0%
Foodstores and essentials 3.1% 7.7% 2.6% 0.5% 13.9% 0.3% 0.0% 0.0% 0.0% 0.3%
Industrial 4.4% 2.5% 1.6% 0.0% 8.5% 1.6% 0.0% 0.0% 0.0% 1.6%
Pubs 0.0% 0.2% 1.4% 0.0% 1.6% 1.7% 4.0% 0.0% 0.0% 5.7%
Arena 0.0% 0.0% 0.0% 0.0% 0.0% 1.4% 0.2% 0.0% 0.0% 1.6%
Car park 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Garden centre 0.0% 1.1% 1.6% 0.0% 2.7% 0.0% 0.0% 0.0% 0.0% 0.0%
Life sciences 0.0% 0.0% 2.4% 0.0% 2.4% 0.0% 0.0% 0.0% 0.0% 0.0%
Drive-thru coffee 0.5% 1.2% 0.1% 0.3% 2.1% 0.0% 0.0% 0.0% 0.0% 0.0%
Education 0.0% 0.1% 0.4% 0.0% 0.5% 1.0% 0.3% 0.0% 0.0% 1.3%
Other 0.4% 0.7% 2.3% 0.6% 4.0% 1.4% 0.0% 0.0% 0.0% 1.4%
1 UC means under construction. We now target EPC B minimum on new forward fundings.
2 The nature of our Car Park assets, being small areas and open sided, make them exempt from holding EPCs.
Social
Increasing DE&I in the built environment
Academy of Real Assets
The Investment Advisor continues its membership of The
Academy of Real Assets, acharitable organisation whose
aim is to enable its members to deliver significant positive
social impact for underprivileged students from schools
across the UK.
The Academy partners with some of the biggest, best and
most-established social mobility charities and other entities to
get access to as many students at UK State schools as possible,
generally via teachers. The mission is to contribute to the
alleviation of educational inequality in particular by providing
students from aless privileged educational background with
exposure to professionals within the industry, to show the
opportunities that exist within the world of property.
The Academy has the following social impact goals:
• To have significant, positive social impact on students from
schools across the UK
• To offer students that do not have connections an off the
shelf contact list to help, guide and advise
• To introduce to all students the huge variety of career
opportunities in the Real Estate, Real Assets and
investment worlds
• To encourage and bring about greater diversity and to
increase access
• To connect students with members via The Academy events
and initiatives
The Academy of Real Assets supports members to pool
resources to deliver the maximum social impact, rather than
relying on individual entities to deliver their own strategy and
more information can be found at www.acadrealassets.com.
This year, through the membership with the Academy,
arepresentative from the Investment Advisor attended aYear
12 Employability Day at Eltham Hill School in the borough of
Greenwich. This volunteering involved helping students with
job interview skills and we are exploring how we can further
assist one of the students who was particularly interested in
acareer in property. That type of further tangible action is
exactly what we are hoping to achieve from these events, and
we have anumber of further events lined up with the Academy
later in the year.
Environmental, Social and Governance (continued)
26 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
10,000 Black Interns
The Investment Advisor is also supporting the 10,000 Black
Interns initiative in 2023 by taking on two first year university
students for asix week paid summer internship program
within its team.
The programme aims to transform the horizon and prospects of
young Black people in the UK by offering paid internship across
awide range of industries whilst also providing training and
development opportunities.
Forward funding
The Company does not undertake direct development
but forward funds development projects. The Company’s
developments always have support from local authorities to
have received planning consent prior to executing the funding
agreement and as such are expected to provide positive public
benefits and that support local communities through provision
of accessible amenities and employment opportunities. We
prioritise the use of local developers.
The Company uses its influence to encourage those developers
to identify and consult with awide range of stakeholders in
the local community and to minimise any negative impacts or
disruption to the local community during construction.
The Company expects new buildings to meet high standards
of environmental performance and to promote the health
and well-being of both the building occupiers and the wider
community. We expect new buildings to have aBREEAM rating
of at least ‘‘Very Good” where arating is obtained. All forward
funded projects that achieved practical completion in the
current year that obtained arating have achieved this.
People and culture
The Company is committed to diversity and inclusion and our
aspiration is to have Board and key service providers that are
representative of society and our wider stakeholder groups.
During the year three new Board members were appointed
and two Board members stepped down. Currently, the Board
comprises of four male and two female Directors, and the
Investment Advisor’s executive team comprises 50% male
and 50% female employees, an increase in gender diversity vs
the previous year at 62% male to 38% female employees and
achieving gender equality.
Governance
The Company’s investment activities are overseen by the
Company’s non-executive Board of Directors. The Investment
Advisor and the Board work together to ensure proper
execution of the Company’s investment strategies, consistent
application of policies, compliance with procedures and
compliance with local and regional regulatory requirements.
The Group has a mature and robust structure of governance,
compliant with the AIC Code of Corporate Governance, which
is detailed in the Corporate Governance section of this annual
report. The Group’s governance complies with its enhanced ESG
policythat has been adopted during the year.
Key decisions and relationships with stakeholders
Each year, the Group is required under section 172(1) of the
Companies Act 2006 to report on how it considered the wider
stakeholder needs in its key decisions. The key stakeholders
are considered to be shareholders, tenant operators,
service providers, employees, lenders and society and the
environment. Further information on stakeholder assessment
is given on page 47.
LXi REIT plc Annual Report 2023 27
Strategic Report GovernanceOverview Financial Statements Additional Information
EPRA sBPR Appendix
Calendar year EPRA code GRI code Metric / Units
Portfolio
(property assets)
LXi REIT Advisors:
External Investment Advisor to the REIT
(downstream purchased services)
Landlord
on-site fuel
Scope 1
Landlord
off-site energy
Scope 2
Tenant energy
and water
Scope 3
Office (HQ)
Scope 3
Business travel
Scope 3
Total portfolio
Electricity
2022 Total electricity consumption Elec-Abs
302-1 annual kWh 491,688 131,810,010 8,019 2,031
2022 Absolute data coverage Elec-Abs 302-1 % Total by floor area 95% 67% 100% 100%
2022 % renewable purchased Elec-Abs 302-1 % Total 25% 54% 0%
2022 % renewable self generated Elec-Abs 302-1 % Total 0.0% 0.1% 0%
2021 Total electricity consumption Elec-Abs 302-1 annual kWh 60,006 108,292,863 15,592
Company
electric vehicles
from November
2021
2021 Absolute data coverage Elec-Abs 302-1 % Total by floor area 24% 56% 100%
2022 Like-for-like Elec-LfL 302-1 annual kWh 62,523 116,708,783 8,019
2021 Like-for-like Elec-LfL 302-1 annual kWh 60,006 103,323,251 15,592
2022 & 2021 Like-for-like data coverage Elec-LfL 302-1 % Total by floor area 24% 53% 100%
2022 vs 2021 Like-for-like % change Elec-LfL 302-1 % change +4% +13% -49%
District heating & cooling
2022 Total dh/c consumption DH&C-Abs
302-1 annual kWh
No LL procured
district heating/
cooling
793,867
No district
heating/ cooling
used by HQ
2022 Absolute data coverage DH&C-Abs 302-1 % Total by floor area 100%
2021 Total dh/c consumption DH&C-Abs 302-1 annual kWh
No district
heating/ cooling
in portfolio in
2021
2021 Absolute data coverage DH&C-Abs 302-1 % Total by floor area
2022 Like-for-like DH&C-LfL 302-1 annual kWh
2021 Like-for-like DH&C-LfL 302-1 annual kWh
2022 & 2021 Like-for-like data coverage DH&C-LfL 302-1 % Total by floor area
2022 vs 2021 Like-for-like % change DH&C-LfL 302-1 % change
Fuel consumption
2022 Total fuel consumption Fuel-Abs
302-1 annual kWh
No LL supply
gas, other fuels
or refrigerants in
portfolio
113,058,671 3,554
2022 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 57% 100%
2021 Total fuel consumption Fuel-Abs 302-1 annual kWh 94,442,995 2,825
2021 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 50% 100%
2022 Like-for-like Fuel-LfL 302-1 annual kWh 96,448,574 3,554
2021 Like-for-like Fuel-LfL 302-1 annual kWh 92,181,748 2,825
2022 & 2021 Like-for-like data coverage Fuel-LfL 302-1 % Total by floor area 47% 100%
2022 vs 2021 Like-for-like % change Fuel-LfL 302-1 % change +5% +26%
Building energy intensity Energy-Int CRE1 kWh/m
2
/yr
No LL supply in
portfolio
60.2 301.6 134.2
Landlord usage, Scope 1: Total direct greenhouse gas (GHG) emissions GHG-Dir-Abs 305-1 tCO
2
e
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 95.1
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 130.3
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 47,171.9 2.2
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 42,992.4 2.2 0.7
Greenhouse gas (GHG) emissions intensity from building energy consumption GHG-Int CRE3 kgCO
2
e/m
2
/yr No LL supply 11.7 75.8 25.5
Water
2022 Total water consumption Water-Abs
303-1 m
3
455,067 31
2022 Absolute data coverage Water-Abs 303-1 % Total by floor area 34% 100%
2022 Building water intensity Water-Int CRE2 m
3
/m
2
/yr 1.5 0.4
2021 Total water consumption Water-Abs 303-1 m
3
396,676 20
2021 Absolute data coverage Water-Abs 303-1 % Total by floor area 30% 100%
2022 Like-for-like Water-LfL 303-1 m
3
424,986 31
2021 Like-for-like Water-LfL 303-1 m
3
393,520 20
2022 & 2021 Like-for-like data coverage Water-LfL 303-1 % Total by floor area 29% 100%
2022 vs 2021 Like-for-like % change Water-LfL 303-1 % change +8% +52%
Total weight of waste by disposal route Waste-Abs 306-2 % metric tonnes/ yr
We have not collected waste management data for calendar year 2022 due to focus on utilities,
but aim to do so next year.
Like-for-like total weight of waste by disposal route Waste-LfL 306-2 % metric tonnes/ yr
Type and number of sustainably certified assets Cert-Tot CRE8 EPC % portfolio England & Wales rated assets: A: 6%, B: 15%, C: 19%, D:13%, E: 5%, F: none, G: none
Remainder of portfolio: 2% exempt, 6% in Scotland, 32% not yet rated, 1% in construction
Type and number of sustainably certified assets Cert-Tot CRE8 BREEAM total no. 5 – Very Good, 1 – Good.
28 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Calendar year EPRA code GRI code Metric / Units
Portfolio
(property assets)
LXi REIT Advisors:
External Investment Advisor to the REIT
(downstream purchased services)
Landlord
on-site fuel
Scope 1
Landlord
off-site energy
Scope 2
Tenant energy
and water
Scope 3
Office (HQ)
Scope 3
Business travel
Scope 3
Total portfolio
Electricity
2022 Total electricity consumption Elec-Abs
302-1 annual kWh 491,688 131,810,010 8,019 2,031
2022 Absolute data coverage Elec-Abs 302-1 % Total by floor area 95% 67% 100% 100%
2022 % renewable purchased Elec-Abs 302-1 % Total 25% 54% 0%
2022 % renewable self generated Elec-Abs 302-1 % Total 0.0% 0.1% 0%
2021 Total electricity consumption Elec-Abs 302-1 annual kWh 60,006 108,292,863 15,592
Company
electric vehicles
from November
2021
2021 Absolute data coverage Elec-Abs 302-1 % Total by floor area 24% 56% 100%
2022 Like-for-like Elec-LfL 302-1 annual kWh 62,523 116,708,783 8,019
2021 Like-for-like Elec-LfL 302-1 annual kWh 60,006 103,323,251 15,592
2022 & 2021 Like-for-like data coverage Elec-LfL 302-1 % Total by floor area 24% 53% 100%
2022 vs 2021 Like-for-like % change Elec-LfL 302-1 % change +4% +13% -49%
District heating & cooling
2022 Total dh/c consumption DH&C-Abs
302-1 annual kWh
No LL procured
district heating/
cooling
793,867
No district
heating/ cooling
used by HQ
2022 Absolute data coverage DH&C-Abs 302-1 % Total by floor area 100%
2021 Total dh/c consumption DH&C-Abs 302-1 annual kWh
No district
heating/ cooling
in portfolio in
2021
2021 Absolute data coverage DH&C-Abs 302-1 % Total by floor area
2022 Like-for-like DH&C-LfL 302-1 annual kWh
2021 Like-for-like DH&C-LfL 302-1 annual kWh
2022 & 2021 Like-for-like data coverage DH&C-LfL 302-1 % Total by floor area
2022 vs 2021 Like-for-like % change DH&C-LfL 302-1 % change
Fuel consumption
2022 Total fuel consumption Fuel-Abs
302-1 annual kWh
No LL supply
gas, other fuels
or refrigerants in
portfolio
113,058,671 3,554
2022 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 57% 100%
2021 Total fuel consumption Fuel-Abs 302-1 annual kWh 94,442,995 2,825
2021 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 50% 100%
2022 Like-for-like Fuel-LfL 302-1 annual kWh 96,448,574 3,554
2021 Like-for-like Fuel-LfL 302-1 annual kWh 92,181,748 2,825
2022 & 2021 Like-for-like data coverage Fuel-LfL 302-1 % Total by floor area 47% 100%
2022 vs 2021 Like-for-like % change Fuel-LfL 302-1 % change +5% +26%
Building energy intensity Energy-Int CRE1 kWh/m
2
/yr
No LL supply in
portfolio
60.2 301.6 134.2
Landlord usage, Scope 1: Total direct greenhouse gas (GHG) emissions GHG-Dir-Abs 305-1 tCO
2
e
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 95.1
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 130.3
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 47,171.9 2.2
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 42,992.4 2.2 0.7
Greenhouse gas (GHG) emissions intensity from building energy consumption GHG-Int CRE3 kgCO
2
e/m
2
/yr No LL supply 11.7 75.8 25.5
Water
2022 Total water consumption Water-Abs
303-1 m
3
455,067 31
2022 Absolute data coverage Water-Abs 303-1 % Total by floor area 34% 100%
2022 Building water intensity Water-Int CRE2 m
3
/m
2
/yr 1.5 0.4
2021 Total water consumption Water-Abs 303-1 m
3
396,676 20
2021 Absolute data coverage Water-Abs 303-1 % Total by floor area 30% 100%
2022 Like-for-like Water-LfL 303-1 m
3
424,986 31
2021 Like-for-like Water-LfL 303-1 m
3
393,520 20
2022 & 2021 Like-for-like data coverage Water-LfL 303-1 % Total by floor area 29% 100%
2022 vs 2021 Like-for-like % change Water-LfL 303-1 % change +8% +52%
Total weight of waste by disposal route Waste-Abs 306-2 % metric tonnes/ yr
We have not collected waste management data for calendar year 2022 due to focus on utilities,
but aim to do so next year.
Like-for-like total weight of waste by disposal route Waste-LfL 306-2 % metric tonnes/ yr
Type and number of sustainably certified assets Cert-Tot CRE8 EPC % portfolio England & Wales rated assets: A: 6%, B: 15%, C: 19%, D:13%, E: 5%, F: none, G: none
Remainder of portfolio: 2% exempt, 6% in Scotland, 32% not yet rated, 1% in construction
Type and number of sustainably certified assets Cert-Tot CRE8 BREEAM total no. 5 – Very Good, 1 – Good.
LXi REIT plc Annual Report 2023 29
Strategic Report GovernanceOverview Financial Statements Additional Information
EPRA sBPR Appendix (continued)
Calendar year EPRA code GRI code Metric / Units
Portfolio (property assets)
Landlord
on-site fuel
Scope 1
Landlord
off-site energy
Scope 2
Tenant energy
and water
Scope 3
Segment analysis: healthcare
Electricity
2022 Total electricity consumption Elec-Abs
302-1 annual kWh
No LL procured
electricity for
healthcare
assets
14,210,005
2022 Absolute data coverage Elec-Abs 302-1 % Total by floor area 89%
2022 % renewable purchased Elec-Abs 302-1 % Total 100%
2022 % renewable self generated Elec-Abs 302-1 % Total 0.0%
2021 Total electricity consumption Elec-Abs 302-1 annual kWh 14,426,522
2021 Absolute data coverage Elec-Abs 302-1 % Total by floor area 89%
2022 Like-for-like Elec-LfL 302-1 annual kWh 13,885,755
2021 Like-for-like Elec-LfL 302-1 annual kWh 14,217,592
2022 & 2021 Like-for-like data coverage Elec-LfL 302-1 % Total by floor area 87%
2022 vs 2021 Like-for-like % change Elec-LfL 302-1 % change -2%
Fuel consumption
2022 Total fuel consumption Fuel-Abs
302-1 annual kWh
No LL supply
gas, other fuels
or refrigerants in
portfolio
17,173,084
2022 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 89%
2021 Total fuel consumption Fuel-Abs 302-1 annual kWh 15,360,293
2021 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 90%
2022 Like-for-like Fuel-LfL 302-1 annual kWh 17,114,665
2021 Like-for-like Fuel-LfL 302-1 annual kWh 15,028,052
2022 & 2021 Like-for-like data coverage Fuel-LfL 302-1 % Total by floor area 89%
2022 vs 2021 Like-for-like % change Fuel-LfL 302-1 % change +14%
Building energy intensity Energy-Int CRE1 kWh/m
2
/yr
No LL supply in
sector
No LL electricity 484.0
Landlord usage, Scope 1: Total direct greenhouse gas (GHG) emissions GHG-Dir-Abs 305-1 tCO
2
e
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e No LL electricity
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e No LL electricity
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 5,882.7
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 3,161.8
Greenhouse gas (GHG) emissions intensity from building energy consumption GHG-Int CRE3 kgCO
2
e/m
2
/yr No LL supply No LL electricity 90.7
Water
2022 Total water consumption Water-Abs
303-1 m
3
No water data
collected for
2022, we look
to address this
for 2023
2022 Absolute data coverage Water-Abs 303-1 % Total by floor area
2022 Building water intensity Water-Int CRE2 m
3
/m
2
/yr
2021 Total water consumption Water-Abs 303-1 m
3
2021 Absolute data coverage Water-Abs 303-1 % Total by floor area
2022 Like-for-like Water-LfL 303-1 m
3
2021 Like-for-like Water-LfL 303-1 m
3
2022 & 2021 Like-for-like data coverage Water-LfL 303-1 % Total by floor area
2022 vs 2021 Like-for-like % change Water-LfL 303-1 % change
Type and number of sustainably certified assets Cert-Tot CRE8 EPC % portfolio England & Wales rated assets: A: none, B: 7%, C: 4%,
D:3%, E: none, F: none, G: none
Remainder of sector: 86% not yet rated
Type and number of sustainably certified assets Cert-Tot CRE8 BREEAM total no. No certified assets in the healthcare sector
30 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Calendar year EPRA code GRI code Metric / Units
Portfolio (property assets)
Landlord
on-site fuel
Scope 1
Landlord
off-site energy
Scope 2
Tenant energy
and water
Scope 3
Segment analysis: healthcare
Electricity
2022 Total electricity consumption Elec-Abs
302-1 annual kWh
No LL procured
electricity for
healthcare
assets
14,210,005
2022 Absolute data coverage Elec-Abs 302-1 % Total by floor area 89%
2022 % renewable purchased Elec-Abs 302-1 % Total 100%
2022 % renewable self generated Elec-Abs 302-1 % Total 0.0%
2021 Total electricity consumption Elec-Abs 302-1 annual kWh 14,426,522
2021 Absolute data coverage Elec-Abs 302-1 % Total by floor area 89%
2022 Like-for-like Elec-LfL 302-1 annual kWh 13,885,755
2021 Like-for-like Elec-LfL 302-1 annual kWh 14,217,592
2022 & 2021 Like-for-like data coverage Elec-LfL 302-1 % Total by floor area 87%
2022 vs 2021 Like-for-like % change Elec-LfL 302-1 % change -2%
Fuel consumption
2022 Total fuel consumption Fuel-Abs
302-1 annual kWh
No LL supply
gas, other fuels
or refrigerants in
portfolio
17,173,084
2022 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 89%
2021 Total fuel consumption Fuel-Abs 302-1 annual kWh 15,360,293
2021 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 90%
2022 Like-for-like Fuel-LfL 302-1 annual kWh 17,114,665
2021 Like-for-like Fuel-LfL 302-1 annual kWh 15,028,052
2022 & 2021 Like-for-like data coverage Fuel-LfL 302-1 % Total by floor area 89%
2022 vs 2021 Like-for-like % change Fuel-LfL 302-1 % change +14%
Building energy intensity Energy-Int CRE1 kWh/m
2
/yr
No LL supply in
sector
No LL electricity 484.0
Landlord usage, Scope 1: Total direct greenhouse gas (GHG) emissions GHG-Dir-Abs 305-1 tCO
2
e
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e No LL electricity
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e No LL electricity
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 5,882.7
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 3,161.8
Greenhouse gas (GHG) emissions intensity from building energy consumption GHG-Int CRE3 kgCO
2
e/m
2
/yr No LL supply No LL electricity 90.7
Water
2022 Total water consumption Water-Abs
303-1 m
3
No water data
collected for
2022, we look
to address this
for 2023
2022 Absolute data coverage Water-Abs 303-1 % Total by floor area
2022 Building water intensity Water-Int CRE2 m
3
/m
2
/yr
2021 Total water consumption Water-Abs 303-1 m
3
2021 Absolute data coverage Water-Abs 303-1 % Total by floor area
2022 Like-for-like Water-LfL 303-1 m
3
2021 Like-for-like Water-LfL 303-1 m
3
2022 & 2021 Like-for-like data coverage Water-LfL 303-1 % Total by floor area
2022 vs 2021 Like-for-like % change Water-LfL 303-1 % change
Type and number of sustainably certified assets Cert-Tot CRE8 EPC % portfolio England & Wales rated assets: A: none, B: 7%, C: 4%,
D:3%, E: none, F: none, G: none
Remainder of sector: 86% not yet rated
Type and number of sustainably certified assets Cert-Tot CRE8 BREEAM total no. No certified assets in the healthcare sector
LXi REIT plc Annual Report 2023 31
Strategic Report GovernanceOverview Financial Statements Additional Information
EPRA sBPR Appendix (continued)
Calendar year EPRA code GRI code Metric / Units
Portfolio (property assets)
Landlord
on-site fuel
Scope 1
Landlord
off-site energy
Scope 2
Tenant energy
and water
Scope 3
Segment analysis: hotels
Electricity
2022 Total electricity consumption Elec-Abs
302-1 annual kWh 24,805 26,113,116
2022 Absolute data coverage Elec-Abs 302-1 % Total by floor area 100% 90%
2022 % renewable purchased Elec-Abs 302-1 % Total 100.0% 0.0%
2022 % renewable self generated Elec-Abs 302-1 % Total 0.0% 0.0%
2021 Total electricity consumption Elec-Abs 302-1 annual kWh 10,499 24,508,188
2021 Absolute data coverage Elec-Abs 302-1 % Total by floor area 27% 90%
2022 Like-for-like Elec-LfL 302-1 annual kWh 11,138 26,113,116
2021 Like-for-like Elec-LfL 302-1 annual kWh 10,499 24,508,188
2022 & 2021 Like-for-like data coverage Elec-LfL 302-1 % Total by floor area 27% 90%
2022 vs 2021 Like-for-like % change Elec-LfL 302-1 % change +6% +7%
Fuel consumption
2022 Total fuel consumption Fuel-Abs
302-1 annual kWh
No LL supply
gas, other fuels
or refrigerants in
portfolio
9,708,790
2022 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 90%
2021 Total fuel consumption Fuel-Abs 302-1 annual kWh 9,435,120
2021 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 90%
2022 Like-for-like Fuel-LfL 302-1 annual kWh 9,708,790
2021 Like-for-like Fuel-LfL 302-1 annual kWh 9,435,120
2022 & 2021 Like-for-like data coverage Fuel-LfL 302-1 % Total by floor area 90%
2022 vs 2021 Like-for-like % change Fuel-LfL 302-1 % change +3%
Building energy intensity Energy-Int CRE1 kWh/m
2
/yr
No LL supply in
sector
16.0 164.3
Landlord usage, Scope 1: Total direct greenhouse gas (GHG) emissions GHG-Dir-Abs 305-1 tCO
2
e
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 4.8
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 0.0
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 6,822.0
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 10,942.4
Greenhouse gas (GHG) emissions intensity from building energy consumption GHG-Int CRE3 kgCO
2
e/m
2
/yr No LL supply 3.1 31.3
Water
2022 Total water consumption Water-Abs
303-1 m
3
398,668
2022 Absolute data coverage Water-Abs 303-1 % Total by floor area 90%
2022 Building water intensity Water-Int CRE2 m
3
/m
2
/yr 1.8
2021 Total water consumption Water-Abs 303-1 m
3
371,270
2021 Absolute data coverage Water-Abs 303-1 % Total by floor area 78%
2022 Like-for-like Water-LfL 303-1 m
3
377,427
2021 Like-for-like Water-LfL 303-1 m
3
371,270
2022 & 2021 Like-for-like data coverage Water-LfL 303-1 % Total by floor area 73%
2022 vs 2021 Like-for-like % change Water-LfL 303-1 % change +2%
Type and number of sustainably certified assets Cert-Tot CRE8 EPC % portfolio England & Wales rated assets: A: 2%, B: 16%, C: 23%,
D:37%, E: 12%, F: none, G: none
Remainder of sector: 10% in Scotland
Type and number of sustainably certified assets Cert-Tot CRE8 BREEAM total no. 5 – Very Good, 1 – Good.
32 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Calendar year EPRA code GRI code Metric / Units
Portfolio (property assets)
Landlord
on-site fuel
Scope 1
Landlord
off-site energy
Scope 2
Tenant energy
and water
Scope 3
Segment analysis: hotels
Electricity
2022 Total electricity consumption Elec-Abs
302-1 annual kWh 24,805 26,113,116
2022 Absolute data coverage Elec-Abs 302-1 % Total by floor area 100% 90%
2022 % renewable purchased Elec-Abs 302-1 % Total 100.0% 0.0%
2022 % renewable self generated Elec-Abs 302-1 % Total 0.0% 0.0%
2021 Total electricity consumption Elec-Abs 302-1 annual kWh 10,499 24,508,188
2021 Absolute data coverage Elec-Abs 302-1 % Total by floor area 27% 90%
2022 Like-for-like Elec-LfL 302-1 annual kWh 11,138 26,113,116
2021 Like-for-like Elec-LfL 302-1 annual kWh 10,499 24,508,188
2022 & 2021 Like-for-like data coverage Elec-LfL 302-1 % Total by floor area 27% 90%
2022 vs 2021 Like-for-like % change Elec-LfL 302-1 % change +6% +7%
Fuel consumption
2022 Total fuel consumption Fuel-Abs
302-1 annual kWh
No LL supply
gas, other fuels
or refrigerants in
portfolio
9,708,790
2022 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 90%
2021 Total fuel consumption Fuel-Abs 302-1 annual kWh 9,435,120
2021 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 90%
2022 Like-for-like Fuel-LfL 302-1 annual kWh 9,708,790
2021 Like-for-like Fuel-LfL 302-1 annual kWh 9,435,120
2022 & 2021 Like-for-like data coverage Fuel-LfL 302-1 % Total by floor area 90%
2022 vs 2021 Like-for-like % change Fuel-LfL 302-1 % change +3%
Building energy intensity Energy-Int CRE1 kWh/m
2
/yr
No LL supply in
sector
16.0 164.3
Landlord usage, Scope 1: Total direct greenhouse gas (GHG) emissions GHG-Dir-Abs 305-1 tCO
2
e
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 4.8
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 0.0
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 6,822.0
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 10,942.4
Greenhouse gas (GHG) emissions intensity from building energy consumption GHG-Int CRE3 kgCO
2
e/m
2
/yr No LL supply 3.1 31.3
Water
2022 Total water consumption Water-Abs
303-1 m
3
398,668
2022 Absolute data coverage Water-Abs 303-1 % Total by floor area 90%
2022 Building water intensity Water-Int CRE2 m
3
/m
2
/yr 1.8
2021 Total water consumption Water-Abs 303-1 m
3
371,270
2021 Absolute data coverage Water-Abs 303-1 % Total by floor area 78%
2022 Like-for-like Water-LfL 303-1 m
3
377,427
2021 Like-for-like Water-LfL 303-1 m
3
371,270
2022 & 2021 Like-for-like data coverage Water-LfL 303-1 % Total by floor area 73%
2022 vs 2021 Like-for-like % change Water-LfL 303-1 % change +2%
Type and number of sustainably certified assets Cert-Tot CRE8 EPC % portfolio England & Wales rated assets: A: 2%, B: 16%, C: 23%,
D:37%, E: 12%, F: none, G: none
Remainder of sector: 10% in Scotland
Type and number of sustainably certified assets Cert-Tot CRE8 BREEAM total no. 5 – Very Good, 1 – Good.
LXi REIT plc Annual Report 2023 33
Strategic Report GovernanceOverview Financial Statements Additional Information
EPRA sBPR Appendix (continued)
Calendar year EPRA code GRI code Metric / Units
Portfolio (property assets)
Landlord
on-site fuel
Scope 1
Landlord
off-site energy
Scope 2
Tenant energy
and water
Scope 3
Segment analysis: industrial
Electricity
2022 Total electricity consumption Elec-Abs
302-1 annual kWh
No LL procured
electricity for
industrial assets
16,423,778
2022 Absolute data coverage Elec-Abs 302-1 % Total by floor area 46%
2022 % renewable purchased Elec-Abs 302-1 % Total 100.0%
2022 % renewable self generated Elec-Abs 302-1 % Total 0.2%
2021 Total electricity consumption Elec-Abs 302-1 annual kWh 12,705,303
2021 Absolute data coverage Elec-Abs 302-1 % Total by floor area 50%
2022 Like-for-like Elec-LfL 302-1 annual kWh 16,423,778
2021 Like-for-like Elec-LfL 302-1 annual kWh 12,067,273
2022 & 2021 Like-for-like data coverage Elec-LfL 302-1 % Total by floor area 46%
2022 vs 2021 Like-for-like % change Elec-LfL 302-1 % change +36%
Fuel consumption
2022 Total fuel consumption Fuel-Abs
302-1 annual kWh
No LL supply
gas, other fuels
or refrigerants in
portfolio
6,183,320
2022 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 46%
2021 Total fuel consumption Fuel-Abs 302-1 annual kWh 8,271,537
2021 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 50%
2022 Like-for-like Fuel-LfL 302-1 annual kWh 6,183,320
2021 Like-for-like Fuel-LfL 302-1 annual kWh 8,262,047
2022 & 2021 Like-for-like data coverage Fuel-LfL 302-1 % Total by floor area 46%
2022 vs 2021 Like-for-like % change Fuel-LfL 302-1 % change -25%
Building energy intensity Energy-Int CRE1 kWh/m
2
/yr
No LL supply in
sector
No LL electricity
247.4
Landlord usage, Scope 1: Total direct greenhouse gas (GHG) emissions GHG-Dir-Abs 305-1 tCO
2
e
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e No LL electricity
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e No LL electricity
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 4,304.7
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 1,132.0
Greenhouse gas (GHG) emissions intensity from building energy consumption GHG-Int CRE3 kgCO
2
e/m
2
/yr No LL supply No LL electricity 47.1
Water
2022 Total water consumption Water-Abs
303-1 m
3
34,400
2022 Absolute data coverage Water-Abs 303-1 % Total by floor area 46%
2022 Building water intensity Water-Int CRE2 m
3
/m
2
/yr 0.4
2021 Total water consumption Water-Abs 303-1 m
3
12,648
2021 Absolute data coverage Water-Abs 303-1 % Total by floor area 41%
2022 Like-for-like Water-LfL 303-1 m
3
32,266
2021 Like-for-like Water-LfL 303-1 m
3
9,492
2022 & 2021 Like-for-like data coverage Water-LfL 303-1 % Total by floor area 36%
2022 vs 2021 Like-for-like % change Water-LfL 303-1 % change +240%
Type and number of sustainably certified assets Cert-Tot CRE8 EPC % portfolio England & Wales rated assets: A: 39%, B: 23%, C: 15%,
D:15%, E: none, F: none, G: none
Remainder of sector: 4% exempt, 5% in Scotland
Type and number of sustainably certified assets Cert-Tot CRE8 BREEAM total no. No certified assets in the industrial sector
34 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Calendar year EPRA code GRI code Metric / Units
Portfolio (property assets)
Landlord
on-site fuel
Scope 1
Landlord
off-site energy
Scope 2
Tenant energy
and water
Scope 3
Segment analysis: industrial
Electricity
2022 Total electricity consumption Elec-Abs
302-1 annual kWh
No LL procured
electricity for
industrial assets
16,423,778
2022 Absolute data coverage Elec-Abs 302-1 % Total by floor area 46%
2022 % renewable purchased Elec-Abs 302-1 % Total 100.0%
2022 % renewable self generated Elec-Abs 302-1 % Total 0.2%
2021 Total electricity consumption Elec-Abs 302-1 annual kWh 12,705,303
2021 Absolute data coverage Elec-Abs 302-1 % Total by floor area 50%
2022 Like-for-like Elec-LfL 302-1 annual kWh 16,423,778
2021 Like-for-like Elec-LfL 302-1 annual kWh 12,067,273
2022 & 2021 Like-for-like data coverage Elec-LfL 302-1 % Total by floor area 46%
2022 vs 2021 Like-for-like % change Elec-LfL 302-1 % change +36%
Fuel consumption
2022 Total fuel consumption Fuel-Abs
302-1 annual kWh
No LL supply
gas, other fuels
or refrigerants in
portfolio
6,183,320
2022 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 46%
2021 Total fuel consumption Fuel-Abs 302-1 annual kWh 8,271,537
2021 Absolute data coverage Fuel-Abs 302-1 % Total by floor area 50%
2022 Like-for-like Fuel-LfL 302-1 annual kWh 6,183,320
2021 Like-for-like Fuel-LfL 302-1 annual kWh 8,262,047
2022 & 2021 Like-for-like data coverage Fuel-LfL 302-1 % Total by floor area 46%
2022 vs 2021 Like-for-like % change Fuel-LfL 302-1 % change -25%
Building energy intensity Energy-Int CRE1 kWh/m
2
/yr
No LL supply in
sector
No LL electricity
247.4
Landlord usage, Scope 1: Total direct greenhouse gas (GHG) emissions GHG-Dir-Abs 305-1 tCO
2
e
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e No LL electricity
Landlord usage, Scope 2: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e No LL electricity
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – location based GHG-Indir-Abs 305-2 tCO
2
e 4,304.7
Tenant & downstream usage, Scope 3: Total indirect greenhouse gas (GHG) emissions – market based GHG-Indir-Abs 305-2 tCO
2
e 1,132.0
Greenhouse gas (GHG) emissions intensity from building energy consumption GHG-Int CRE3 kgCO
2
e/m
2
/yr No LL supply No LL electricity 47.1
Water
2022 Total water consumption Water-Abs
303-1 m
3
34,400
2022 Absolute data coverage Water-Abs 303-1 % Total by floor area 46%
2022 Building water intensity Water-Int CRE2 m
3
/m
2
/yr 0.4
2021 Total water consumption Water-Abs 303-1 m
3
12,648
2021 Absolute data coverage Water-Abs 303-1 % Total by floor area 41%
2022 Like-for-like Water-LfL 303-1 m
3
32,266
2021 Like-for-like Water-LfL 303-1 m
3
9,492
2022 & 2021 Like-for-like data coverage Water-LfL 303-1 % Total by floor area 36%
2022 vs 2021 Like-for-like % change Water-LfL 303-1 % change +240%
Type and number of sustainably certified assets Cert-Tot CRE8 EPC % portfolio England & Wales rated assets: A: 39%, B: 23%, C: 15%,
D:15%, E: none, F: none, G: none
Remainder of sector: 4% exempt, 5% in Scotland
Type and number of sustainably certified assets Cert-Tot CRE8 BREEAM total no. No certified assets in the industrial sector
LXi REIT plc Annual Report 2023 35
Strategic Report GovernanceOverview Financial Statements Additional Information
EPRA sBPR Appendix (continued)
Social performance measures
sBPR Code Metric / Units Portfolio (property assets)
LXi REIT Advisors:
External Investment
Advisor to the REIT
Employee gender diversity Diversity-Emp % employees
We do not currently
collect this data from
our occupier companies,
but we recognise the
benefit of monitoring
good business practices
across the portfolio and
aim to begin doing so in
future.
57% women, 43% men
Gender pay ratio Diversity-Pay Ratio
Not currently shared
externally
Employee training and development Emp-Training Average hours Ad-hoc training only
Employee performance appraisals Emp-Dev % employees
78% completed their
appraisal
New hires and turnover Emp-Turnover Number & rate
6 new hires in 2022 –
noleavers
Employee health and safety H&S-Emp
A new system for tracking
these KPI's is in development
following the Group's merger
to form AlTi
– Injury rate H&S-Emp Rate
– Absentee rate H&S-Emp Rate
– Number of work related fatalities H&S-Emp Rate
Asset health and safetyassessments H&S-Asset % assets None (0%)
Asset health and safety compliance H&S-Comp No. incidents None (0%)
Community engagement,
impactassessments &
developmentprograms
Comty-Eng % assets Only one of the 17
forward funded
developments live in
2022 delivered
community engagement.
Improving on this is top
priority for us.
Social performance measures
LXi REIT plc (corporate)
Composition of the highest
governancebody
Gov-Board Total no. The Board consists of six non-executive Directors,
including the Chairman, of whom four are male
andtwo female and one Board member is of an
ethnicminority.
Process for nominating and
selecting thehighest
governancebody
Gov-Selec Narrative A search consultant independent of the Company is
used to find people with the right skills and experience
for the position of non-executive Directors when
required. The Directors have abroad range of relevant
experience to meet the Company’s requirements and
their biographies are given in the Board of Directors
section of the Annual Report. The Board recognises
thebenefits to the Company of having longer serving
Directors together with progressive refreshment of
theBoard in line with corporate governance best
practice. There is no fixed policy regarding tenure
ofdirectorships.
Process for managing conflicts
ofinterest
Gov-CoI Narrative The Directors declare any conflicts or potential
conflictof interest to the Board which has the
authority to approve such situations. The Company
Secretary maintains the Register of Directors’
Conflictsof Interests which is reviewed at each
quarterly board meeting, and when changes are
notified. The Directors advise the Company Secretary
and Board as soon as they become aware of any
conflicts of interest. Directors who have conflicts of
interest do not take part in discussions which relate
toany of their conflicts.
36 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Data analysis: assumptions and methodology:
Data scope & boundaries:
Boundary: We have elected to adopt the Operational Control
approach. As Scope 3 emissions are outside of our direct
control, we do not deem estimation of usage and emissions to
be appropriate as the currently available benchmarks are very
generic in their nature and therefore could result in significant
under- or overestimation of usage.
Properties where no landlord utility consumption data was
obtained are excluded from the reported usage and emission
figures, and the same approach was adopted for tenant usage.
Any estimation of utility usage data was only carried out to
fill gaps in billing. This affected <3% of tenant data received
and is therefore not material. Missing periods are estimated
for landlord areas on three of the 16 sites in the portfolio
with landlord-controlled areas and is therefore not deemed
significantly material.
Methodology used to back-fill: total billed divided by months
covered multiplied by the number of months without data.
LXi REIT holds assets let predominantly on long FRI leases.
Only15 of the total 346 sites have any landlord controlled
areas; across these, energy procurement is limited to
electricity, majority of which is for outdoor lighting only.
Scopes: Property emissions reporting is in line with the Better
Buildings Partnership’s best practice framework:
• Scope 1: Landlord emissions from on-site fuels and
refrigerants (of which there are none in the portfolio)
• Scope 2: Emissions from landlord procured electricity
• Scope 3: Emissions from tenant purchased energy and
refrigerants, landlord and tenant purchased water, and
landlord downstream purchased services. The last category
currently covers emissions from LXi REIT Advisors’
(the Company’s external Investment Advisor) office use
and business travel, but does not yet cover embodied
carbon from forward-funded development activities. We
aim to extend coverage to this aspect from next year’s
reporting onwards.
In calculating the Group’s emissions, we have considered the
emissions relevant to LXi REIT plc as well as LXi REIT Advisors,
being the investment advisor.
We rely on our tenant partners to provide the necessary data to
report on our Scope 3 emissions. For calendar year 2022, data
coverage was at 67% electricity usage, 57% gas and 34% water.
Our GHG emissions reporting follows the Greenhouse Gas
(GHG) Protocol Corporate- Accounting and Reporting Standard.
Methodology notes:
The energy and carbon emissions data presented here is for the
reporting period 01 January 2022 to 31 December 2022 and for
the comparative period 01 January 2021 to 31 December 2021.
In reporting market-based emissions, we have accounted for
a factor of 0.000203 for the proportion of electricity supply
coming from renewable energy contracts. Of the remaining
electricity supply that was not procured through a renewable
contract, we have calculated market-based emissions using
the appropriate residual fuel mix factors for the region; Source:
https://www.carbonfootprint.com/docs/2023_02_emissions_
factors_sources_for_2022_electricity_v10.pdf
Theme park assets are excluded from energy intensity
calculations, as it is not possible to quantify their floor areas in
a manner consistent with other commercial buildings.
We report on standalone segments where emissions currently
account for >5% total reported portfolio emissions but
excluding theme parks and life sciences for data confidentiality
reasons, as we only have a single tenant in both these sectors.
Fuel consumption covers mains natural gas, LPG, Petrol, Diesel
and Kerosene used on-site. Electric cars and trains are used
for the Company’s Investment Advisor’s business travel; 2022
emissions are based on 8,589 miles travelled in electric cars
and 465 miles by National Rail, with relevant emissions factors
applied to expensed mileage. Consumption and emission
intensity for calendar year 2021 has been updated with the
receipt of additional data.
Emission conversion factors:
Emission conversion factors used are the 2022 UK GHG factors;
source: https://www.gov.uk/government/publications/
greenhouse-gas-reporting-conversion-factors-2022
Emissions from indirect sources are reported both on location
and market-based approaches, with market-based reflecting
renewable tariffs.
Explanations for notable year-on-year changes:
Large increase in head office gas usage is partly due to taking
onan additional floor in 2022.
Notable increase in like-for-like electricity consumption in the
industrial sector is offset by a move away from gas across a
number of sites.
LXi REIT plc Annual Report 2023 37
Strategic Report GovernanceOverview Financial Statements Additional Information
Tenant group
Contracted
rent
Rental
exposure
Merlin £37.9m 19%
Travelodge £37.0m 18%
Ramsay £36.3m 18%
Q-Park £4.5m 2%
SMG £4.4m 2%
The Brewery £3.8m 2%
Bombardier £3.7m 2%
Sainsburys £3.5m 2%
Compass £3.4m 2%
Asda £3.2m 2%
Dobbies Garden Centres £3.2m 2%
Capita £2.9m 1%
Co-op £2.8m 1%
Tesco £2.8m 1%
Other tenants £52.8m 26%
Total £202.2m 100%
Unexpired lease term to first break
Contracted
rent
Rental
exposure
20-years+ £122.5m 61%
More than 14-years, fewer than 19-years £64.6m 32%
More than 9-years, fewer than 14-years £11.6m 6%
More than 5-years, fewer than 9-years £0.9m 0%
Fewer than 5-years £2.6m 1%
Total £202.2m 100%
Location
Contracted
rent
Rental
exposure
South East £40.5m 20%
West Midlands £35.2m 17%
East of England £30.2m 15%
North West £23.9m 12%
Yorkshire and the Humber £17.2m 9%
Scotland £13.0m 6%
South West £12.9m 6%
North East £9.7m 5%
East Midlands £8.2m 4%
Germany £7.4m 4%
Wales £2.8m 1%
Northern Ireland £1.2m 1%
Total £202.2m 100%
Sector
Contracted
rent
Rental
exposure
Healthcare £45.2m 22%
Budget hotels £42.8m 21%
Theme parks £37.9m 19%
Foodstores £20.2m 10%
Industrial £13.3m 7%
Pubs £8.7m 4%
Arena £7.1m 4%
Car parks £4.5m 2%
Garden centres £3.2m 2%
Life sciences £2.9m 1%
Drive-thru coffee £2.7m 1%
Education £2.2m 1%
Other £11.5m 6%
Total £202.2m 100%
Portfolio summary
RENTAL UPLIFTS
% of rental exposure
CPI linked 39%
Fixed uplifts 34%
RPI linked 25%
Open market 2%
38 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
KPI and definition Relevance to strategy Performance Result
2023 2022
1. Total NTA return
Total NTA return measures the change in the
EPRA NTA and dividends during the period
as apercentage of EPRA NTA at the start
of the period. We are targeting aminimum
of 8% per annum over the medium term.
Total accounting return measures the
ultimate outcome of our strategy, which is
to deliver value to our shareholders through
our portfolio and to deliver asecure and
growing income stream. Areconciliation
of total accounting return is provided in
the Additional Information section.
(10.7)%
18.2% The current year result is below
the Group’s medium-term
minimum target of 8% per annum.
Average compounded annual total accounting return since IPO
7.5%
11.4%
2. Dividend per share
Dividends paid to shareholders and
proposed in relation to aperiod.
The dividend reflects our ability to deliver
alow risk but growing income stream
from our portfolio and is akey element
of our total accounting return.
6.30p
6.00p During the year the Group
targeted dividends on a quarterly
basis and all dividend targets
announced were met.
Average compounded annual dividend growth since IPO
9.5%
10.7%
3. EPRA Net Tangible Assets
(“NTA”)
A measure of NAV designed by EPRA to
present the fair value of acompany on
along term basis. Assumes that entities
buy and sell assets, thereby crystallising
certain levels of unavoidable deferred tax.
The NAV reflects our ability to grow
the portfolio and to add value to it
throughout the life cycle of our assets.
121.1p
142.6p EPRA NTA per share
contracted 15.1%.
Average compounded EPRA NTA growth since IPO (ex-dividend)
3.5%
7.6%
4. Pro forma net loan to value
The proportion of our total assets that are
funded by borrowings adjusted for full
drawdown of committed capital increasing
the net leverage and completion of assets
under construction increasing the portfolio
value. Our medium-term target LTV is
30%. See glossary for calculation.
The LTV measures the relative risk of our
financing strategy, balancing the additional
returns and portfolio diversification
that come with using debt against the
need to successfully manage risk.
37%
22% Above our medium term
maximum target of 35%
5. Adjusted earnings per share
Post-tax Adjusted earnings per share
attributable to shareholders, which
includes the licence fee receivable on
our forward funded development assets
treated under IFRS as discounts to
investment property acquisitions.
The Adjusted earnings per share reflects
our ability to generate income from our
portfolio, which ultimately underpins our
dividend payments. Areconciliation of
Adjusted earnings is included in Note 25
tothe consolidated financial statements.
6.7p
7.0p Reflecting 1.06 dividend cover
6. Total expense ratio
The ratio of total operating expenses,
including management fees expressed as
apercentage of the average net asset value.
The total expense ratio is akey measure of our
operational efficiency. Maintaining alow cost
base supports our ability to pay dividends.
0.9%
1.0% In line with our target
7. Weighted average
unexpiredlease term
The average unexpired lease term
of the property portfolio weighted
by annual passing rents. Our target
WAULT is aminimum of 20 years.
The WAULT is akey measure of the
quality of our portfolio. Long lease
terms underpin the security and
predictability of our income stream.
27 years
21 years In line with our
investment objective
8. Percentage of contracted
rentsindex-linked or fixed
This takes the total value of contracted
rents that contain rent reviews linked
to inflation or fixed uplifts.
This measures the extent to which we
are investing in line with our investment
objective, to provide inflation linked returns.
98%
96% In line with our
investment objective
Our objective is to deliver attractive, low risk returns to shareholders, by executing our investment policy.
Set out below are the key performance indicators (“KPIs”) we use to track our performance.
Key performance indicators
LXi REIT plc Annual Report 2023 39
Strategic Report GovernanceOverview Financial Statements Additional Information
The table below shows additional performance measures, calculated in accordance with the Best Practices Recommendations of
European Public Real Estate (“EPRA”). We provide these measures to aid comparison with other European real estate businesses.
Reconciliations of EPRA Earnings and NAV measures are included in Notes 25 and 26 to the consolidated financial statements
respectively. Reconciliations of other EPRA performance measures in the Notes to the EPRA and alternative performance
measures further below.
EPRA performance measures
Measure and Definition Purpose
Performance
31 March
2023
31 March
2022
1. EPRA Earnings Per Share
A measure of EPS designed by EPRA to present
underlying earnings from core operating activities.
A key measure of acompany’s underlying operating results and an indication
of the extent to which current dividend payments are supported by earnings.
8.3p
6.1p
2a. EPRA Net Tangible Assets (“NTA”)
An EPRA NAV per share metric which assumes
entities buy and sell assets, thereby crystallising
certain levels of unavoidable deferred tax.
Assumes that entities buy and sell assets, thereby crystallising
certain levels of unavoidable deferred tax.
121.1p
142.6p
3. EPRA Net Reinstatement Value (“NRV”)
An EPRA NAV per share metric which assumes
entities never sell assets and aims to represent
the value required to rebuild the entity.
Assumes that entities never sell assets and aims to represent the value
required to rebuild the entity.
131.4p
153.7p
4. EPRA Net Disposal Value (“NDV”)
An EPRA NAV per share metric which represents
the Shareholders’ value under a disposal scenario,
where deferred tax, financial instruments and
certain other adjustments are calculated to the full
extent of their liability, net of any resulting tax.
Represents the shareholders’ value under adisposal scenario, where
deferred tax, financial instruments and certain other adjustments are
calculated to the full extent of their liability, net of any resulting tax.
119.8p
143.7p
5. EPRA Net Initial Yield (“NIY”)
Annualised rental income based on the cash rents passing
at the balance sheet date, less non-recoverable property
operating expenses, divided by the market value of the
property, increased with (estimated) purchasers’ costs.
EPRA NIY is annualised net rents on investment properties as apercentage
of the investment property valuation, less purchaser’s costs.
5.7%
4.5%
6. EPRA ‘Topped-Up’ NIY
This measure incorporates an adjustment to the
EPRA NIY in respect of the expiration of rent-free
periods (or other unexpired lease incentives such
as discounted rent periods and step rents).
The ‘topped-up’ measure incorporates an adjustment to the EPRA NIY
in respect of the expiration of rent-free periods (or other unexpired
lease incentives such as discounted rent periods and step rents).
Note under IFRS stepped rents and collared uplifts are treated as
lease incentives and as such are factored into the top up.
9.4%
6.6%
7. EPRA Vacancy
Estimated Market Rental Value (ERV) of vacant
space divided by ERV of the whole portfolio.
A ‘pure’ (%) measure of investment property space that is vacant,
basedonERV.
0%
0%
8. EPRA Cost Ratio
Administrative & operating costs (including costs of
direct vacancy) divided by gross rental income.
A key measure to enable meaningful measurement of the changes in
acompany’s operating costs.
9.5%
15.9%
9. EPRA LTV (note this is different to pro
forma LTV in our KPIs)
Net debt divided by total property portfolio and
other eligible assets in line with EPRA guidance.
A key (shareholder-gearing) metric to determine the percentage of net debt
comparing to the appraised value of the properties
36%
13%
40 LXi REIT plc Annual Report 2023
LXi REIT plc Annual Report 2023 41
Additional InformationFinancial StatementsOverview GovernanceStrategic Report
Strategic Report GovernanceOverview Financial Statements Additional Information
The Investment Advisor
John White
Joint Fund Manager
John entered the commercial real estate market in
1987 and after qualifying as achartered surveyor at
Allsops moved to the investment team at Cushman
& Wakefield. There he became apartner and spent
the next 18 years advising arange of institutional
investor clients on their UK acquisitions and
disposals across the full range of real estate
sub-sectors including retail (in and out of town),
offices (London, Thames Valley and regional cities),
logistics, and alternatives. John moved into private
equity real estate in 2007 and co-founded Osprey
Equity Partners in 2011 and LXi REIT Advisors
Limited in 2016
Simon Lee
Joint Fund Manager
Simon trained and practised as asolicitor at City
law firm, Slaughter and May, from 1999 to 2006,
following which he spent the next 10 years in
private equity real estate, co-founding Osprey
Equity Partners in 2011 and LXi REIT Advisors
Limited in 2016. Simon’s role covers awide range of
areas, including formulating investment strategies
and products, raising equity and debt finance,
asset selection, and negotiating and implementing
transactions with vendors, purchasers, developers,
investors, lenders and joint venture partners.
Freddie Brooks
Chief Financial Officer
Freddie trained and qualified as achartered
accountant in BDO’s Real Estate and Construction
team, gaining significant experience in the sector,
working with similar listed vehicles, private
property funds, developers and anumber of the
UK’s top contractors. Freddie is also aqualified
chartered surveyor (property finance and
investment pathway) and amember of the RICS.
Freddie role covers all historical and strategic
financial matters including debt structuring and
sourcing, annual and interim financial reporting,
budgeting and forecasting, treasury management
and the monitoring of internal controls. Freddie
is also responsible for the Investment Advisor’s
reporting to the Company’s Board of Directors.
The Board has delegated the day-to-day running of the Group to LXi REIT Advisors Limited pursuant to the terms of the
Investment Advisory Agreement. The Investment Advisory Agreement is reviewed and amended when necessary to ensure it
reflects the relationship between the Board and the Investment Advisor.
The Investment Advisor comprises property, legal and finance professionals with significant experience in long-let real estate
working exclusively on LXi Reit. The team has capitalised and transacted over £3.5bn of commercial property assets with
aparticular focus on accessing secure, long-let and index-linked UK commercial real estate through forward funding and built
asset structures. The core management team (whose details are set out below) is supported by ateam of other finance, legal,
property and compliance professionals and administrative support staff totalling over 15 people. The key individuals responsible
for executing the Company’s investment strategy are:
42 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Alex Short
Chief Investment Officer
Alex trained as a Chartered Surveyor and has over
25 years of industry experience. In her previous role
Alex was Fund Manager of AEW UK REIT from IPO
in 2015 until joining LXI in 2023. AEW UK REIT was
the top performing REIT in peer group and winner of
CityWire best performing UK Property Trust in 2021
and 2022. Before that Alex was Managing Director at
UBS and Fund Manager of UBS Triton and UBS SERF.
Rob Ward
Head of Real Estate
Robert Ward, MSc, MRICS, is a qualified Chartered
Surveyor, who trained at CBRE with more than
15 years’ experience in commercial property,
specialising in operational real estate and long
income mandates. Rob joined from Prestbury,
where he helped to launch and manage Secure
Income REIT through to its merger with LXi in 2022.
Alex MacEachin
Finance Director
Alex trained as a Chartered Accountant specialising
in real estate and construction with a focus on
REITs. Alex’s previous role was Group Financial
Controller at Empiric Student Property plc,
Experience leading all strategic financial matters,
including Company reporting, budgeting and
forecasting, treasury management and the
monitoring of internal controls.
LXi REIT plc Annual Report 2023 43
Strategic Report GovernanceOverview Financial Statements Additional Information
Investment objective
The investment objective of the Company is to deliver inflation
linked income and capital growth over the medium-term for
shareholders through investing in adiversified portfolio of UK
property that benefits from long-term index-linked leases with
institutional-grade tenants.
Investment policy
The Company will target inflation linked income and capital
returns through adiversified portfolio of UK property assets,
let or pre-let to abroad range of tenants with strong covenants
on long and index-linked leases.
The Company will invest in these assets directly or through
holdings in special purpose vehicles and will seek to acquire
high quality properties, taking into account the following key
investment considerations:
• the properties will be let or pre-let to institutional grade
tenants, with strong financials and aproven operating
track record;
• long unexpired lease terms (typically 20 to 30 years to expiry
or first break);
• rent reviews to be inflation linked or contain fixed
uplifts; and
• each property should demonstrate strong residual land
value characteristics.
The Company targets awide range of defensive and robust
sectors, including, but not limited to, healthcare, theme
parks, office, leisure, industrial, distribution and alternatives –
including hotels, serviced apartments, affordable housing and
student accommodation. It also focuses on growth sub-sector
areas such as discount foodstores, budget hotel operators and
“last mile” distribution units fuelled by online retail.
The Company seeks to only acquire assets let or pre-let
to tenants with strong financial covenants and on long
leases (typically 20 to 30 years to expiry or first break),
with index linked or fixed rental uplifts, in order to provide
securityofincome and low cost of debt. The Company only
invests in assets with leases containing regular upward-only
rental reviews. These reviews typically link the growth in rents
to an inflation index such as RPI, RPIX or CPI (with potentially
aminimum and maximum level) or alternatively may have
afixed growth rate.
The Company will neither undertake any direct development
activity nor assume direct development risk. However,
the Company may invest in fixed-price forward funded
developments, provided they are pre-let to an acceptable
tenant and full planning permission is in place. In such
circumstances, the Company will seek to negotiate the receipt
of immediate income from the asset, such that the developer
is paying the Company areturn on its investment during the
construction phase and prior to the tenant commencing rental
payments under the terms of the lease.
Where the Company invests in forward funded developments:
• the Company will not acquire the land until full planning
consent and tenant pre-lets are in place;
• the Company will pay afixed price for the forward
funded purchase, covering land, construction cost and
developer’s profit;
• all cost overruns will be the responsibility of the developer/
contractor; and
• if there is adelay to completion of the works, this will be
arisk for the developer/contractor, as they will pay the
Company areturn on the agreed acquisition price until
practical completion occurs.
The Company may utilise derivative instruments for efficient
portfolio management. The Company will look to actively
engage in full or partial interest rate hedging or otherwise seek
to mitigate the risk of interest rate increases as part of the
Company’s portfolio management.
The Company will not invest in other investment funds.
Investment objective and policy
44 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Investment restrictions
The Company will invest and manage its assets with the
objective of diversifying risk and will have the following
investment restrictions:
• the value of no single property, at the time of acquisition of
the relevant investment, will represent more than 30% of
the higher of: (i) Gross Asset Value; or (ii) where the Company
has not yet become fully geared, Gross Asset Value adjusted
on the assumption that the Company’s property portfolio is
geared at 30% loan to value;
• the aggregate maximum exposure to any one tenant, at the
time of acquisition of the relevant investment, will be 30% of
the higher of: (i) Gross Asset Value; or (ii) where the Company
has not yet become fully geared, Gross Asset Value adjusted
on the assumption that the Company’s property portfolio is
geared at 30% loan to value; and
• the Company will invest in no fewer than two sectors
at any time.
The Company will not be required to dispose of any investment
or to rebalance its portfolio as aresult of achange in the
respective valuations of its assets.
The Directors are focused on delivering capital growth over
the medium term and intend to reinvest proceeds from any
potential future disposals in accordance with the Company’s
investment policy. However, should the Company fail to
reinvest the proceeds or part proceeds from any disposal within
12 months of receipt of the net proceeds, the Directors intend
to return those proceeds or part proceeds to shareholders in
atax efficient manner as determined by the Directors from
time to time.
Cash held for working capital purposes or received by the
Company pending reinvestment or distribution will be held in
sterling only and invested in cash, cash equivalents, near cash
instruments and money market instruments.
The Directors intend at all times to conduct the affairs of
the Company so as to enable it to qualify as aREIT for the
purposes of Part 12 of the CTA 2010 (and the regulations
made thereunder).
The Company will at all times invest and manage its assets
in away that is consistent with its objective of spreading
investment risk and in accordance with its published
investment policy and will not at any time conduct any trading
activity which is significant in the context of the business of the
Company as awhole.
Borrowing policy
The Group will seek to utilise borrowings to enhance equity
returns. The level of borrowing will be on aprudent basis for
the asset class, and will seek to achieve alow cost of funds,
whilst maintaining flexibility in the underlying security
requirements and the structure of the Group. The Directors
intend that the Group will maintain aconservative level of
aggregate borrowings with amedium-term target of 30% of
the Group’s gross assets and amaximum level of aggregate
borrowings of 40% of the Group’s gross assets at the time of
drawdown of the relevant borrowings.
Debt will be secured at the asset level and potentially at the
Company or SPV level, depending on the optimal structure for
the Company and having consideration to key metrics including
lender diversity, debt type and maturity profiles.
In the event of abreach of the investment policy and
investment restrictions set out above, the Directors upon
becoming aware of such breach will consider whether the
breach is material, and if it is, notification will be made to
aRegulatory Information Service.
No material change will be made to the investment policy
without the approval of shareholders by ordinary resolution
at any general meeting, which will also be notified by an
RNS announcement.
LXi REIT plc Annual Report 2023 45
Strategic Report GovernanceOverview Financial Statements Additional Information
This section of the Annual Report covers the Board’s
considerations and activities in discharging their duties under
s.172(1) of the Companies Act 2006, in promoting the success of
the Company for the benefit of members as awhole.
This statement includes consideration of the likely
consequences of the decisions of the Board in the longer
term and how the Board has taken wider stakeholders’
interests into account.
Stakeholder identification and management
The Board has identified the major stakeholders in the
Company’s business. On an ongoing basis the Board
monitors both potential and actual impacts of the decisions
it makes in respect of the Company upon those major
stakeholders identified.
Shareholders: As apublic company listed on the London Stock
Exchange, the Company is subject to the Listing Rules and the
Disclosure Guidance and Transparency Rules. The Listing Rules
include alisting principle that alisted company must ensure
that it treats all holders of the same class of shares that are in
the same position equally in respect of the rights attaching to
such shares. With the assistance of regular discussions with
and the formal advice of the Company’s legal counsel, secretary
and corporate brokers, the Board abides by the Listing
Rules at all times.
For information on shareholder engagement please see the
Governance section of this report which contains further
information on shareholder engagement.
To agreat extent, shareholder engagement on behalf of the
Company is managed by the Investment Advisor under the
terms of its agreement with the Company. The Investment
Advisor along with the Company’s corporate broker regularly
meets with the Company’s shareholders to provide Company
updates and to foster regular dialogue.
The members of the Board are available to meet with
shareholders atevery AGM and on other occasions
as appropriate.
Employees: As an externally managed business, the Company
does not have any employees as all of its functions are
carried out by third party service providers. The Company
has a Board of Directors who are non-executive and receive
fixed fee remuneration. The Directors have a range of skills
and experience on which they can draw in weighing up the
impact of decisions on the Company and its stakeholders.
The Company’s Board receives regular market and regulatory
updates from its professional advisors such as the Investment
Advisor, Broker and Company Secretary. Diversity and
representation are considered as part of the Company’s
recruitment policy and future director recruitment processes
will reflect this alongside a focus on appropriately balancing the
skills and experience available to the Company.
Tenants: Business relationships with suppliers, customers
and other counterparties are key. Engagement is managed in
the main by the Investment Adviser with a view to fostering
good two way communication with respect for all staff and
respecting supplier payment terms.
Board activity and stakeholder considerations
The Board’s main working relationship is with the Investment
Advisor. The Group’s performance to date has been strong
and in all cases has exceeded or met its stated medium term
targets. This performance is underpinned by the quality of the
Investment Advisor’s management team. Inparticular, this is
reflected in the sourcing of high quality assets at attractive
pricing, the management of the risks and exposures of the
Company’s portfolio, the development and maintenance
of relationships with shareholders and financiers and
the regularity and quality of reporting to the Company’s
stakeholders. Most recently the management team has
delivered a very significant refinancing against a challenging
debt environment.
The Board retains responsibility for the approval of every
material transaction, including property, debt and other
corporate transactions and in doing so is able to give due
consideration to its wider stakeholder group. The Board
relies on the Investment Advisor’s sourcing and due diligence
conclusions which are presented to the Board before each
transaction. In turn, the Board offers a robust challenge to
validate the quality of each investment and the impact of all
transactions on stakeholder groups.
The Board also deliberates on the quality of each tenant’s
robustness, financial viability, reputation, corporate values and
operational excellence in its sub-sector before approving each
transaction and monitors it on an ongoing basis.
The Board’s long-term strategic goal has been to maximise
shareholder value by growing the Company in aprudent
and accretive manner. As such the Board carefully considers
the merits of raising new equity and debt capital before it is
approved. It works closely with the Investment Advisor to
advance due diligence on apre-identified pipeline to adefensive
position that will allow the timely execution of deals once new
capital is raised. The Board considers the respective merits
and risks of raising new capital and at what price before any
potential equity raise is approved.
Section 172 statement
46 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Stakeholder engagement during the year
Stakeholder
Why should we
engage withthem? How we engage withthem
Key themes and
pointsofinterests Key Decisions and actions taken
Investors
In order to better align
the Company with that of
its shareholders, paying
particular attention
to their aspirations
and long-term goals
Through anumber of shareholder
meetings held throughout the
year. Also, indirectly through the
Company’s website, Annual Report
and Interim Report and at the AGM.
• High and rising dividend;
• Growth of the Company;
• Diversity of the
Company’s portfolio;
• Integration of ESG
considerations into all
aspects of strategy.
Following the many shareholder meetings the
Board has taken the following actions:
• Completed the merger with Secure Income REIT
plc which almost doubled the size of the Company,
enabled the Company to quickly diversify its
portfolio of investments;
• ESG has become akey consideration when
considering each acquisition. Due diligence
requirements have been enhanced beyond EPC
ratings, construction certification and Net Zero
audits, to include forward looking climate risk
assessment, green clauses in leases and anumber
ofsocial impact and wellbeing criteria.
Tenants
To help the Board develop
aclear understanding
of the challenges facing
tenants and so that the
Board can respond rapidly
to the changing needs and
demands of its tenants.
Extensive due diligence undertaken
as part of tenant selection process.
Regular communications with
tenants are maintained throughout
tenancy agreement especially during
times of uncertainty (i.e. lockdown).
Tenant and industry changing
needs are monitored;
The Board are focused on asset
management initiatives to assist
tenants in achieving the maximum
value from each site and thereby,
increasing each sites strategic
importance to the tenant and in
doing so increasing the security of
the Company’s revenue stream.
ESG continues to increase
in importance to each
client, driving demand for
environmentally sustainable
buildings that are also
accretive to staff health
and wellbeing and foster
opportunities to add value
to local communities.
The evolving business
plans of the Company’s
tenants also identify the
changing needs of the end
customer, particularly the
increase in online shopping
along with aubiquitously
growing demand for
sustainable products,
services and infrastructure
(including EV chargers).
In response to the changing needs of the Company’s
tenants, the Board has agreed, and the Investment
Advisor has implemented, anumber of initiatives
to improve the environmental impact of certain of
its sites where deemed appropriate, including:
• Installing EV charging points;
• Installing solar panels;
• Improved EPC rating;
• Taking measures to protect sites at risk from severe
weather events e.g. flooding;
• Exploring opportunities for biodiversity
enhancement;
• Supporting tenants with high quality
decarbonisation audits at their sites;
• Assessing opportunities to fund building
fabric and M&E improvements through return
generating investment;
• Deploying additional resource into evaluating
opportunities to collaborate on local social
impactinitiatives.
Key Service
Providers
As an externally managed
investment trust, the
Company conducts all
its business through its
key service providers.
In order to better align
the Company’s values
with that of its key
service providers. To
ensure the challenges
faced by the Company’s
key service providers
are identified and
considered by the Board.
The Board performs an annual
evaluation of all of its key service
providers to ensure inter alia that the
Company’s values remain aligned.
The Board has regular interaction
with the Investment Advisor,
AIFM, Broker, Company Secretary,
Administrator and Depositary
and receives reports on the
performance of the rest of the key
service providers by the Investment
Advisor and Company Secretary
The conclusion of the
annual evaluation of the
Company’s service providers
did not raise any concerns.
No issues were identified during the year and the
Board confirmed that they remained appropriate
and that their appointment continue.
During the year the Board resolved to
appoint anew Company Secretary and on
6 March 2023 LSDC Nominee Secretary Limited
was appointed as Company Secretary.
Society
andthe
environment
To ensure that the
Company’s activities
have apositive impact
on communities and
the environment.
The Board, via their Investment
Advisor, seek to engage with its
tenants and local communities
to gain agreater understanding
of their concerns and views
The Board has become aware
that there is strong focus
on ESG matters at certain
sites. Social concerns at
certain sites are considered.
The Company has adopted an ESG policy and climate
risk strategy that ensure that society and the
environment are considered whilst implementing its
investment strategy. The ESG policy is available on
the Company’s website and the Environmental, Social
and Governance report is included on pages 17 to 27
of this Annual Report. Further detail on achievements
to date and aplan for the future is covered in the
Company’s ESG Strategy and Roadmap to Net Zero
Carbon document available on the website.
Lenders
To ensure the Company’s
lending needs continue
to be met. To ensure the
values of the Company’s
lenders are aligned with
that of the Company’s.
The Group works closely with
lenders to maintain aconstructive
relationship through ongoing
engagement. The Investment
Advisor regularly discusses
ongoing initiatives and portfolio
matters with its lenders.
The Investment Advisor
takes into account the terms
of its loan agreements
when implementing the
investment strategy
The Group uses leverage with robust and resilient
structures. Including conservative covenants with
ample headroom and fixed or hedged interest costs.
LXi REIT plc Annual Report 2023 47
Strategic Report GovernanceOverview Financial Statements Additional Information
Principal risks and uncertainties
The Board of LXi REIT plc has overall responsibility for risk management including reviewing the effectiveness of the risk
management processes and internal controls which are operated by the Investment Advisor and the Administrator. As part
of their risk management responsibilities at least twice yearly and more often if needed, the Investment Advisor undertakes a
formal review to identify new risks and review existing risks. This review considers the velocity of each risk to highlight significant
emerging risks that are raised and discussed with the Board and Audit Committee. The principal risks outlined below have the
potential to materially impact the execution of the Group’s strategy and business model.
Changes to principal risks and uncertainties
In the September 2022 interim report, it was communicated that the following risks were no longer deemed principal risks of the
Group but remain on the internal risk register for monitoring:
• Covid-19 global pandemic
• Competition for properties
• REIT status
The following risk has been added as principal risks in the second half of the year:
• Ability to access attractive capital for refinancing
The Board has increased the probability relating to the property valuation and tenant default risks from low to moderate. This
is driven by the wider macroeconomic environment in the UK that has seen high inflation levels, increasing interest rates and
aslowing economy, with the possibility of entering an economic recession. Arecessionary environment could negatively impact
real estate valuations and increases the possibility of tenants entering financial difficulty and in turn raises the risk of their
defaulting on contractual rental obligations.
Principal risks and uncertainties
Risk Mitigant Probability Impact
Macroeconomic related risks
Ability to access attractive capital for refinancing
risk (new risk in the year)
The UK is currently experiencing high levels of inflation and
the Bank of England has responded by multiple successive
interest rate increases, contributing to an increasing
cost of debt finance. The UK has also been impacted
by global banking and credit supply challenges.
The Board reviews the Group’s financing arrangements and
considers options for refinancing well ahead of maturity. There
remain opportunities to find attractive leverage terms through for
example inflation linked debt, hybrid debt/equity products and
‘income strip’ sales, such as the Group executed during the period,
should the Group need to utilise these options in the future.
The post refinancing weighted average term to maturity of the Group’s
debt is 6 years and the Group has no refinancing events within the next
12 months. The next refinancing event for the Group is December 2024.
One response to alack of financing would be asale of assets if the
investment market supported it; at current valuations, there is
significantheadroom over debt. Another response would be to raise
equityto repay debt.
Moderate High
Tenant default risk
The current environment has increased the risk of
tenant default, the extent of which varies significantly
by business sector and individual companies.
The Group’s revenues are concentrated among the top three tenants,
contributing to over 55% of total contracted income. Atenant
or guarantor could fail to meet its lease obligations because of
the specific operational performance of abusiness at one of the
Group’s properties in particular or because of issues with the capital
structure of that business. This risk is elevated due to current wider
economic challenges and the risk the UK economy enters arecession.
Dividends payable are dependent on the rent collection
of the group and covenant compliance.
Covenant reviews on all tenants over 2% of portfolio rents
are provided to the Board quarterly for review.
Guarantors are in place for major tenants with financing from
global operations of major businesses underpinning rents.
Robust monitoring of rent collections with 100% collection throughout
the year. Rent collection of 100% is calculated as cash rent collected
from tenants in respect of the financial year of £160.1m as a percentage
of the total rent demanded in respect of the financial year of £160.2m.
Moderate
(from low)
Moderate
48 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Risk Mitigant Probability Impact
Macroeconomic challenges
The UK is experiencing historic price rises with the highest
inflation rate in 40 years, and aslowing economy. The Bank of
England has responded by successive interest rate increases
which could lead to asharp decline in economic activity,
stock markets and possibly stagflation. Arecessionary
environment could impact real estate valuations.
Continued high inflation may cause contracted rents to
exceed market levels and result in the softening of valuation
yields. Where leases have capped rental uplifts, high
inflation may cause rent reviews to cap out at maximum
values, causing rental uplifts to fall behind inflation.
Increasing interest rates may cause the company to find it
difficult or costly to finance through debt in the future.
Inflation is monitored closely by the Board. The Group’s portfolio rent
reviews include amix of fixed, upward only capped and collared uplifts
as well as some uncapped rent reviews, to hedge against avariety of
inflationary outcomes. Where lease agreements facilitate data collection,
the Group also monitors rent cover and asset level performance.
The Group also maintains significant debt covenant headroom to provide
protection against arange of economic scenarios.
The Group has interest rate caps and swaps in place for all drawn debt
overthe period to maturity. This covers 99% of all committed debt. The
Company intends to hedge the remaining debt by the time it is required
tobe drawn.
High Moderate
Business objective risks
Geopolitical risk
Political changes or political instability impacting the Group’s
performance through changes in regulatory requirements and
applicable laws, and political, economic or other developments.
A change in government has the potential to impact taxes, spending,
environmental and other regulations that could impact the Company.
Russia’s invasion of Ukraine in February 2022 contributed to
asurge in global energy and food prices. The extent and impact
of military action, resulting sanctions and further market
disruptions is unpredictable which increases the uncertainty, and
challenges of tenant operators as well as consumer confidence
and financial markets. This could lead to arecession should
the conflict move towards abroader regional or global one.
The Board recognises that the level of uncertainty
makes the risk difficult to mitigate.
The strength of our tenant and guarantor group, tied with
our significant covenant headroom levels, reduces the risk of
political and economic uncertainty impacting our Company and
it should be well positioned to withstand any downturn.
Major tenants have along track record of trading
through difficult economic cycles.
With the exception of one German asset amounting to less than 4%
of total contracted rent, all Group investments are in the UK.
High Moderate
Property and real estate risks
Property valuation
The Group invests in commercial properties. Property
is inherently difficult to value due to the individual
characteristics of each property. As aresult, valuations are
subject to uncertainty and there can be no assurance that the
estimates resulting from the valuation process will reflect
actual sales prices that could be realised by the Group.
Such investments may be illiquid; they may be difficult
for the Group to sell in atimely manner and the price
achieved on any realisation may be at adiscount to the most
recent prevailing valuation of the relevant property.
Reported property valuations are at apoint in time
and not an indicator of future performance.
The Group’s independent third party valuer relies on the
information provided by the Investment Advisor to produce
its valuations. The valuer does not use source documents.
An error in the information provided to the valuer could
result in material error in the property valuation.
The Group only acquires properties with strong fundamentals that
are of strategic importance to their tenants. The Group aims to
hold assets for long-term income and embeds income growth into
leases which contributes toward positive valuation movements.
An experienced independent third party valuer has been
appointed to carry out bi-annual property valuations.
The performance of independent third party service providers,
including the property valuer, is regularly reviewed by the Board.
The valuer inspects each property at least once annually.
The Investment Advisor agrees all information included in the valuation
report back to source data each time the portfolio is valued and holds
meetings with the valuer to discuss each valuation produced.
The data provided to the valuer is reviewed internally by the
Investment Advisor and by the Board of Directors of the Group.
The Board meets separately with the valuers to discuss each valuation.
Moderate
(from low)
Moderate
to high
LXi REIT plc Annual Report 2023 49
Strategic Report GovernanceOverview Financial Statements Additional Information
Risk Mitigant Probability Impact
Tenant default risk
Dividends payable by the Group will be dependent on the
income from the properties it owns. Failure by one or more
material tenants to comply with their rental obligations
could affect the ability of the company to pay dividends
The Investment Advisor undertakes thorough due diligence before
proposing investments to the Board and only proposes assets let
to strong tenants with proven operating track records who should
be able to pay the rents as and when they are due. The assets we
hold are also key operating assets to our tenants meaning that the
renal income is secure. We also closely monitor rent receipts.
The Investment Advisor continues to monitor the creditworthiness
of its tenant and guarantor counterparties by quarterly reviews of
operating performance and liquidity, as well as reviews of other
data including credit ratings and press. The Investment Advisor
has regular communication with tenants to discuss the operating
performance of its assets as well as at acorporate level.
The Investment Advisor focusses on sectors that have acompetitive tenant
market and properties that demonstrate strong fundamentals such as
low rents, low level of specification and strong trading performance at an
asset level. These factors protect against the potential downside impact
of tenant default as the property is attractive to alternative users.
The Investment Advisor reports covenant reviews on all tenants
over 2% of the portfolio to the Board quarterly for review.
Moderate
(from low)
Moderate
Compliance risks
Operating within banking covenants
The Group’s borrowing facilities contain certain financial
covenants relating to Loan to Value ratio and Interest Cover ratio,
abreach of which could lead to adefault on the loan, or which
may lead to penalty interest rates, accelerated amortisation
or ‘cash traps’. The Group must continue to operate within
these financial covenants to avoid penalties or default.
The Group aims to acquire property with alow loan to value ratio where
there is significant headroom for valuation movements and significant
ICRheadroom.
The Investment Advisor and/or AIFM monitor compliance with the
bankingloan covenants.
The Investment Advisor reports quarterly to the Board on the various debt
covenants. The Investment Advisor reports on the headroom of each
covenant level under various sensitised scenarios and also carries out
reverse stress testing to identify the point at which covenants are breached.
Low High
Operational risks
Dependence on the Investment Advisor
The Group relies on the Investment Advisor’s services,
market intelligence, relationships and expertise. To
alarge extent, the Group’s performance is reliant on
the continued service of the Investment Advisor.
A termination of the Investment Advisory Agreement
would have an adverse impact on the Group’s
performance if an acceptably high quality alternative
replacement could not be found in atimely manner.
The Board has executed a long-term Investment Advisory Agreement.
securing the services of the Investment Advisor until 6 July 2028.
Key Person provisions exist in the Investment Advisory agreement
relating to the senior executives, namely Simon Lee, Frederick Brooks
and John White. The provisions require that the individuals’ time is
spent exclusively in relation to the Company and that the departure
of any two of those individuals would require a replacement of
at least equal standing. Failure to replace the Key Person could
result in termination of the Investment Advisory contract.
The Board meets regularly with the Investment Advisor to promote
apositive working relationship and the performance of the Investment
Advisor is monitored by the Management Engagement Committee.
The Investment Advisory fee is asliding scale % based on market
capitalisation to align the Investment Advisor’s interest with those of
the shareholders. The senior members of the Investment Adviser are
also shareholders in the Company, further aligning their interests.
The Investment Advisor is contractually required to grow its own
resource to properly service the needs of the business and this has been
demonstrated by the recruitment of additional personnel where appropriate
to support the continued effective management of the Company.
Low High
Principal risks and uncertainties (continued)
50 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
Risk Mitigant Probability Impact
Climate-related risks
Property valuation
As institutional property investors and owners increase their
focus on climate risk, there is likely to become alarger pool of
capital looking to invest in energy efficient assets as well as apool
of capital migrating away from certain less efficient assets.
Although this represents an opportunity for those best-
in-class assets to achieve a‘green premium’, there is likely
to be adwindling pool of capital willing, and awider yield
demanded, to invest in assets that are less energy efficient.
The combined effect may result in greater polarisation of
property values and/or have an impact on rental values.
The assets within the Group’s portfolio that are less energy efficient
may be exposed to downward pressure on valuation or increased
pressure to invest in the improvement of individual assets.
During the period the Investment Advisor recruited aHead of ESG who
works with the Board to develop aroad map to an energy efficient property
portfolio including an appropriate policy for minimum energy performance
across the Group’s assets, as explained in the ESG section of this report.
A Climate Risk Working Group has been created to identify,
assess and manage climate related risks. Members of the working
group include the Chairman of the Board of Directors.
While there is still alack of clarity on where responsibilities under the
various regulations will sit between landlord and tenants, the Investment
Advisor has worked with consultants to obtain high level costs estimates
to (a) improve EPCs to levels required by the next stage MEES (currently
in consultation), (b) decarbonise buildings fully to Net Zero, as per UK
ultimate 2050 legally binding target. Immediate strategic focus is on those
assets where costs of remediation are likely to be particularly high, it’s
unlikely the tenant would undertake any of the improvement works.
Due to the fast-evolving landscape this is akey area to monitor.
Moderate High
Access to capital
There is arisk that investor sentiment restricts the Company’s
ability to grow through continued investment from existing
and new shareholders if investors do not see the Company
as fitting within their own investment criteria. This could
potentially impact share price and access to capital.
As we see an increase in ‘green debt’ issues (bonds and RCFs), we are
seeing an increased preference for lenders toward products with
‘green’ parameters and acheaper cost of debt for those instruments.
Providers of finance for the Company may set specific climate risk
related parameters for counterparties (by policy or by law) that
will reduce the Company’s access to capital if it does not meet the
relevant criteria, or they may increase the Company’s cost of debt.
The Company manages the risk associated with access to capital
through the implementation of relevant, transparent and comparable
reporting to shareholders, investors and the wider stakeholder group.
The Investment Advisor also regularly communicates with the Company’s
shareholders and lenders to discuss changing parameters and
requirements for investment.
Shareholders have increased their focus on data collected by
the Company and consistency of ethos, particularly when it
comes to sustainability and climate-related matters.
Focus is on data coverage improvement (doubled for 2022 calendar
year), improvements to our disclosures and tangible implementation of
decarbonisation measures at asset level in collaboration with tenants.
Moderate High
Regulatory Risk
Changes in legislation over the longer-term as well as other
factors such as the energy efficiency of real estate being
incompatible with legislation and targets that impact the
occupier, may result in our assets becoming unlettable
or other costs, such as taxes or fines being levied against
assets that perform poorly in terms of climate impact.
The Board remains abreast of changes in legislation through the work of
the Climate Risk Working Group and engages experts where needed.
The Group’s overall climate risk strategy is designed to ensure that the
Company meets the appropriate ‘green’ credentials that will continue to
allow it access debt and equity capital markets on acceptable terms.
Proposed updates to MEES regulation, any further developments
in relation to the proposed Carbon Emissions (Buildings)
Bill, any advancement in costing carbon in construction
as proposed by the parliamentary Environmental Audit
Committee and the planned mandatory publication of transition
plans by businesses are being closely monitored.
Moderate
(from low)
High
LXi REIT plc Annual Report 2023 51
Strategic Report GovernanceOverview Financial Statements Additional Information
Going concern and viability
The financial statements of the Group and Company have been
prepared on a going concern basis.
The Group has an Investment Grade credit rating, a healthy
liquidity position and comfortable headroom against financial
covenant levels. In light of current macroeconomic uncertainty,
we draw comfort from the Group’s robust balance sheet and
high-quality portfolio of commercial property assets let or
pre-let on long term, index-linked leases to a wide range of
strong tenant covenants highly diversified by tenant, sector
and location.
The completion of the acquisition of Secure Income REIT during
the year provided further strength and resilience to the balance
sheet through scale, with net assets increasing from £1.3bn
at 31 March 2022 to £2.1bn at 31 March 2023. The Group also
completed a refinancing of over £700m of debt post year end
and extended a £60m facility during the year. The refinancing
increased the weighted average term to maturity from 3 years
at 30 September 2022 to 6 years at 31 March 2023.
Contracted rental income grew from £79.7m in 2022 to £202.2m
in 2023 while the EPRA cost ratio decreased from 15.9% to
9.5%, showing increased earnings generation which will
support liquidity.
In particular, the Board has regard to the following
characteristics of the Company in assessing going concern
and viability:
Low-cost debt facilities, with comfortable
covenantheadroom
• The Group’s pro-forma net loan to value (“LTV”) as at
31 March 2023 was 37%, following a £232m repayment of
the Merlin A Serling facility during the year. Following the
Group’s refinancing event after the year end, the pro-forma
net LTV remains at 37%
• The Group’s portfolio is currently valued at £3.4bn reflecting
a valuation yield of 5.4%, a 70bps spread from the weighted
average cost of debt of 4.7% pa, a slight increase on the pre-
refinancing cost of debt of 4.2% pa
• The Group has comfortable headroom to LTV and ICR
covenant levels within each facility at covenant levels
at 31 March 2023 and at post-refinancing pro-forma
covenant levels
• The total weighted average cost of drawn debt across all
facilities post refinancing is capped at 4.7% pa over the next
three-year period
• No breaches of loan covenants during the forecast going
concern period
Defensive and diversified portfolio that is 100% let or pre-let
on long leases to strong tenant covenants
• The Group’s portfolio is 100% let or pre-let to over 80 strong
tenants, across 13 sub-sectors. Furthermore, the tenants
are the main trading or parent companies within the tenant
groups with strong financial covenants
• The Group draws comfort from the financial robustness of
the major tenants and analysis and reports to the Board
the financial covenants of all tenants contributing to >2%
ofcontracted rent roll on a quarterly basis.
• The Group benefits from a secure income stream of leases
with an average 27 years to first break across the portfolio.
Each lease is drawn on a fully repairing and insuring basis
– tenants are responsible for repair, maintenance and
outgoings, so there is no cost leakage for the Company
• 100% rent collected in the year from tenants
Strong liquidity
• At 31 March 2023 the Group had net assets of £2.1bn
(31 March 2022: £1.3bn) and a cash balance of £74.4m
(31 March 2022: £72.5m), including secured cash of £29.1m
• Post balance sheet date, the Group completed the
refinancing of various facilities that were due to expire in the
near term resulting in total borrowings of £1,298.6m
Virtually all rent has inflation-protection, through
indexed or fixed uplifts, providing substantial protection
and the opportunity to generate rental growth in a high
inflationary environment.
Debt maturity
Post refinancing, the Group has a 6-year weighted average term
to maturity with no debt maturing within 12 months of the
approval date of the financial statements. The next refinancing
event relates to the £60m HSBC leisure facility which falls due
in December 2024. The Group’s financial projections show there
are sufficient funds for the facility to be repaid in full from free
cash. The next large refinancing event following is in October
2025 and relates to the £293m AIG healthcare facility and
represents 23% of the total post refinancing committed debt.
52 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
LXi REIT plc Company
Although the Company has net current liabilities, there are
sufficient distributable reserves to cover the final dividend for
the 12 months to 31 March 2023.
Although the intercompany debt within the PLC is classed as
non-current, this debt is technically due on demand the sub
groups have sufficient equity to repay these liabilities.
Going concern statement
The Board have considered the period to 30 June 2024 for
the going concern assessment. Based on the considerations
above and on stress tests and reverse stress tests, the Board
believes that the Group and the Company have the ability to
continue in business for at least twelve months from the date
of approval of these financial statements and therefore have
adopted the going concern basis in the preparation of this
financial information.
Conclusion
On this basis, we consider that there are no material
uncertainties in relation to the Group or Company’s ability to:
1) continue in operation for the period of at least 12
months from the date of approval of the consolidated
financial statements
2) meet its liabilities as they fall due
Longer term viability model
Viability statement
In accordance with the AIC Code of Corporate Governance,
the Board must assess the prospects of the Group over a
longer period than the 12 months required by the ‘Going
Concern’ provision.
The financial projections used in this report cover a period
that is longer than a number of the Group’s debt facilities
and hedging instruments in place. It is assumed within the
projections that these facilities and hedging instruments are
renewed or taken out by an equivalent financing arrangement
with consistent terms to the current refinanced rates when
they expire. This is supported by SONIA forward swap rates
at 31 March 2023 being lower than the overall average capped
cost of debt across all facilities.
Five years to 31 March 2028 is considered by the Board to be an
appropriate viability period for the following reasons:
• The Group’s weighted average debt maturity at
31 March 2023 was 5.7 years
• HM Treasury provide medium term inflation forecasts to
2027 which are taken as the inflation forecast assumptions in
the projections
• The Group has a WAULT of 27 years, representing secure and
predicable income during that time frame
• 44% of leases contain five yearly rent reviews which allows
for the forecasts to include the majority of rent reviews
• Five years is covered by the Group’s medium term detailed
financial projections
Covenant compliance has been modelled over the viability
period and the Investment Advisor has presented to the Board
for its consideration the sensitivity of the financial projections
to key assumptions impacting compliance with secured
debt covenants.
The sensitivities performed were designed to be severe
but plausible; and to take full account of the availability of
mitigating actions that could be taken to avoid or reduce the
impact or occurrence of the underlying risks:
Downturn in economic outlook: key assumptions including
tenant default, void periods and income growth were sensitised
to reflect reasonably likely levels associated with a longer-
term economic downturn. The financial projections include
rental increases in line with rent reviews, meaning the tightest
forecasted covenant headroom in the viability period is the
current LTV and ICR covenant headroom levels.
Restricted availability of finance: The Group’s first significant
refinancing event (assuming all extension options are taken)
is December 2024. It is forecast that the Group would have
sufficient cash to repay this facility. The next large refinancing
event falls in October 2025. The Group’s policy is to arrange
alternative finance in advance of expected requirements and
the Directors have reasonable confidence that an extension,
additional or replacement debt facilities will be put in place
prior to the refinancing date. Some assurance is taken from
the successful recently completed refinancing. Furthermore,
the Group has the ability to make disposals of investment
properties to meet the future financing requirements if
necessary and has demonstrated its ability to do so.
LXi REIT plc Annual Report 2023 53
Strategic Report GovernanceOverview Financial Statements Additional Information
Sensitivity analysis
Analysis performed
Loan covenant reverse stress test
We have performed analysis to test the extent to which the
valuation of our current portfolio and rental income should
have to fall (due to contractual nature of income and lease
length, this could only be the result of a tenant default) in
order to result in a breach in each facility for the debt profile
as at 31 March 2023 and the post refinancing debt profile.
All facilities at 31 March 2023 have comfortable headroom
to covenants, with the tightest LTV covenant requiring a
31% reduction in value before a breach and the tightest ICR
covenant requiring a 40% loss of rent before a breach. This
represents our ‘reverse stress test’ and shows at what point the
Group would breach its covenants.
We have also carried out a ‘reverse stress test’ on the
current post refinancing position which shows comfortable
headroom to covenants, the tightest LTV covenant requiring
a 30% reduction in value before a breach and the tightest ICR
covenant requiring a 31% loss of rent before a breach. For
the facilities that contain cash trap covenants, the tightest
covenant would require a 30% reduction in value and a 27% loss
of rent before a breach.
In the unlikely event portfolio valuations decrease by the
amount required to trigger a breach, the Group has a number
of options available to rectify a breach. These include revising
dividend payments, considering a rights issue and disposal
of assets. Similarly, if rent reduced by an amount to trigger a
breach, the Group is able to cash cure with uncommitted cash
from elsewhere in the Group.
Conclusion
On this basis we recommend that the Board approves the going
concern and longer-term viability section of the annual report.
Approval
The Strategic Report was approved by the Board of Directors
Cyrus Ardalan
Chairman
6 June 2023
Going concern and viability (continued)
54 LXi REIT plc Annual Report 2023
Additional InformationFinancial StatementsGovernanceStrategic ReportOverview
Governance
Governance
Directors’ report 56
Corporate governance statement 59
Report of the Audit Committee 67
Report of the Management Engagement Committee 70
Depositary statement 71
Directors’ remuneration report 72
Statement of Directors’ responsibilities 76
Independent Auditor’s report 78
LXi REIT plc Annual Report 2023 55
Governance Financial Statements Additional InformationStrategic ReportOverview
The Directors present their report for the year ended
31 March 2023.
Dividends
The Company issued its annual dividend guidance
on 10 January 2022 of 6.30 pence per Ordinary share
payable quarterly in respect of the year commencing
1 April 2022 as follows:
The first quarterly dividend in respect of the year ended
31 March 2023 of 1.575 pence per share was paid on
18 November 2022.
The second quarterly dividend in respect of the year
ended 31 March 2023 of 1.575 pence per share was paid on
4 January 2023.
The third quarterly dividend in respect of the year ended
31 March 2023 of 1.575 pence per share was paid on
10 March 2023.
On 6 June 2023 the Board approved a fourth quarterly dividend
in respect of the year ended 31 March 2023 of 1.575 pence per
share, payable on 6 July 2023 to shareholders on the register at
16 June 2023. The ex-dividend date will be 15 June 2023.
This will take the total dividends paid in respect of the year to
6.30p per share, in line with the Company’s dividend target. The
dividend will be paid as aProperty Income Distribution (“PID”).
On 13 April 2023 the Company announced adividend target of
6.6 pence per share for the 12 month period that commenced
on 1 April 2023 (a 4.8% increase on the dividend target for the
year ended 31 March 2023).
The dividend will be paid in four quarterly instalments and
reflects the Company’s policy of paying aprogressive dividend
which is fully covered by net earnings.
After the year end the Directors became aware that certain
dividends paid since the Merger had been made otherwise than
in accordance with the Companies Act 2006 as the relevant
accounts of the Company did not show distributable reserves at
the time of payment.
The affected dividends are the interim dividend of 1.575 pence
per Ordinary Share for the quarter ended 30 June 2022 (paid
on 18 November 2022), the interim dividend of 1.575 pence
perOrdinary Share for the quarter ended 30 September 2022
(paid on 4 January 2023) and the interim dividend of 1.575 pence
per Ordinary Share for the quarter ended 31 December 2022
(paid on 10 March 2023) (the “Relevant Dividends”).
Under the Companies Act 2006, a public company can only
pay a dividend out of its distributable profits as shown in its
“relevant accounts”. Although there were sufficient profits and
other distributable reserves within the Company’s group to
pay the Relevant Dividends at each payment date, the relevant
accounts of the Company (being the accounts for the year
ended 31 March 2022) did not show sufficient distributable
reserves and the payment of the Relevant Dividends therefore
constitutes a procedural breach of the Companies Act 2006.
At the forthcoming AGM of the Company’s shareholders
a special resolution will be proposed to remedy this issue,
including authorising the appropriation of distributable profits
to the payment of the relevant dividends and removing any
right for the Company to pursue its shareholders or directors
for repayment of those dividends. The overall effect of this
resolution being passed will be to return all parties (so far
as possible) to the position they would have been had the
Relevant Dividends been made in full compliance with the
Companies Act 2006.
Directors
The names of the current Directors are given in the Board
of Directors section of this report, together with their
biographical details and other information.
Following the completion of the merger with Secure Income
REIT plc Nick Leslau and Sandy Gumm were appointed as
Non-Executive Directors with effect from 6 July 2022. On
15 July 2022 and 19 July 2022 respectively, Jeannette Etherden
and Patricia Dimond retired from the Board.
The Company maintains Directors’ and Officers’ liability
insurance cover at its expense and on the Directors’ behalf.
Principal professional advisors
AIFM and Investment Advisor
Alvarium Fund Managers (UK) Limited is the Company’s AIFM.
The Company and the AIFM have appointed LXi REIT Advisors
Limited as Investment Advisor to provide certain services in
relation to the Company and its portfolio. The Management
Engagement Committee report includes details of the
remuneration of the AIFM and the Investment Advisor.
The AIFM is regulated in the conduct of investment business
by the FCA. The AIFM is, for the purposes of the AIFMD and the
rules of the FCA, a‘full scope’ UK alternative investment fund
manager with aPart 4A permission for managing AIFs, such
as the Company.
Depositary
Langham Hall UK Depositary LLP has been appointed as
Depositary to provide cash monitoring, safekeeping and
asset verification and oversight functions as prescribed by
the AIFMD. The Depositary Statement is included in this
Annual Report.
Company Secretary
During the year the Board ran a tender process to replace the
company secretary which was led by the MEC Chairman. As a
result, it was agreed to appoint LDC Nominee Secretary Limited
as the Company Secretary of the Company on 6 March 2023
to provides company secretarial services and a registered
office to the Company. Following a period of handover, Apex
Listed Companies Services (UK) Limited (previously Sanne
Fund Services (UK) Limited) resigned as Company Secretary
on 6 March 2023.
Directors’ report
56 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
Administrator
Langham Hall UK Services LLP has been appointed as
Administrator to the Company. The Administration of the
Company is delegated and in consultation with the AIFM and
the Investment Advisor, financial information of the Group
prepared by the Administrator is reported to the Board.
Share capital
Capital structure and voting rights
As at 31 March 2023, the Company’s issued share capital
comprised 1,714,473,236 ordinary shares, each of 1p nominal
value. Each ordinary share held entitles the holder to one vote
and there are no restrictions on those voting rights. Voting
deadlines are stated in the Notice and Form of Proxy and are in
accordance with the Companies Act 2006.
There are no restrictions on the transfer of ordinary shares, nor
are there any limitations or special rights associated with the
ordinary shares.
The Company did not purchase any of its ordinary shares
during the year, nor did any nominee or third-party with
the Company’s assistance acquire any shares on behalf
of the Company.
Premium management and share issuance
As part of the merger with Secure Income REIT plc,
the Shareholders granted authority to allot 62,182,761
new ordinary shares on 14 July 2021 which lapsed on
14 October 2022. Shareholders granted authority to
allot 1,074,817,168 new ordinary shares on 22 June 2022
which lapsed on 31 December 2022. At the AGM held on
5 September 2022 shareholders granted authority to issue
afurther 171,447,323 new ordinary shares, with pre-emption
rights disapplied. This authority expires at the conclusion of the
forthcoming Annual General Meeting.
In the previous financial year, the Company under aseparate
programme issued 289,742,125 new ordinary shares, raising
total gross proceeds of £353m.
General authority to issue shares
The issuance of new ordinary shares is entirely at the
discretion of the Board, and no expectation or reliance should
be placed on such discretion being exercised on any one or
more occasions.
The maximum number of ordinary shares which can be
admitted to trading on the London Stock Exchange without the
publication of aprospectus is 20% of the ordinary share capital
on arolling previous 12 month basis at the time of admission
of the shares.
Any new ordinary share issues will be issued at par or at
apremium (ex income) to net asset value.
The Board believes that there are benefits in the Company
having the ability to issue new shares. An ordinary resolution
seeking shareholders’ authority to issue new ordinary shares
together with aspecial resolution to disapply pre-emption
rights will be put forward for approval at the Company’s
forthcoming Annual General Meeting (“AGM”).
Treasury shares & discount management
The Company has no treasury shares. The Companies Act 2006
allows companies to hold shares acquired by way of market
purchase as treasury shares, rather than having to cancel them.
This would give the Company the ability to re-issue ordinary
shares quickly and cost effectively thereby improving liquidity
and providing the Company with additional flexibility in the
management of its capital base.
No ordinary shares will be sold from treasury at aprice less
than the net asset value per existing ordinary share at the time
of their sale unless they are first offered pro rata to existing
shareholders. No ordinary shares have been bought back since
the Company’s launch.
The Company may seek to address any significant discount to
net asset value at which its ordinary shares may be trading
by purchasing its own ordinary shares in the market on
an ad hoc basis.
The Directors currently have the authority to make market
purchases of up to 256,999,538 ordinary shares. The maximum
price (exclusive of expenses) which may be paid for an ordinary
share must not be more than the higher of:
(i) 5 per cent. above the average of the mid-market values
of the ordinary shares for the five Days before the
purchase is made; or
(ii) at aprice stipulated by the regulatory technical standards
adopted by the EU pursuant to the Market Abuse
Regulation from time to time.
Ordinary shares will only be repurchased at prices below the
most recently published net asset value per ordinary share,
which should have the effect of increasing the net asset value
per ordinary share for other shareholders.
It is intended that arenewal of the authority to make market
purchases will be sought from shareholders at each AGM of the
Company. Purchases of ordinary shares will be made within
guidelines established from time to time by the Board. Any
purchase of ordinary shares would be made only out of the
available uncommitted cash resources of the Group.
Ordinary shares repurchased by the Company may be held in
treasury or cancelled.
The Directors will have regard to the Company’s REIT status
when making any repurchase, and purchases of ordinary
shares may be made only in accordance with Companies Act
2006, the Listing Rules and the Disclosure Guidance and
Transparency Rules.
LXi REIT plc Annual Report 2023 57
Governance Financial Statements Additional InformationStrategic ReportOverview
Investors should note that the repurchase of ordinary shares
is entirely at the discretion of the Board and no expectation or
reliance should be placed on such discretion being exercised on
any one or more occasions or as to the proportion of ordinary
shares that may be repurchased.
A resolution to renew the Company’s authority to purchase its
own shares will be put forward for approval at the Company’s
forthcoming AGM.
Settlement of ordinary share transactions ordinary Share
transactions in the Company are settled by the CREST share
settlement system.
Significant shareholders
The following table outlines shareholdings comprising 3%
or more of the issued share capital of the Company as at
31 March 2023.
Name
Holding as at
31March2023
Percentage as at
31March2023
Artemis Investment Management LLP 112,054,884 6.54%
Nicholas Mark Leslau 95,978,407
1
5.60%
Vanguard Group Inc. 76,548,784 4.46%
Quilter Cheviot Limited 62,197,855 3.63%
Investec Wealth & Investment Limited 58,628,093 3.42%
1 Includes companies wholly owned and persons closely associated (as defined by the UK
Market Abuse Regulation) with the Director
Employees
The Company has no employees and no share schemes.
Modern Slavery Act 2015, Bribery Act 2010 and Criminal
Finance Act 2017
The Directors are satisfied that, to the best of their knowledge,
the Company’s principal suppliers, as listed above under
Principal Professional Advisors, comply with the provisions of
the Modern Slavery Act 2015 and maintain adequate safeguards
in keeping with the provisions of the Bribery Act 2010 and
Criminal Financed Act 2017.
Streamlined Energy & Carbon Reporting framework
For further information refer to the ESG Report.
Financial instruments
The Group uses financial derivatives to hedge its exposure to
interest rate risks on its variable rate borrowings.
The Group’s financial risk management objectives and
policies are included in Note 23 to the consolidated
financial statements.
Engagement with stakeholders and principal decisions
Refer to the S172 statement.
Donations
No donations have been made during the year (Prior year: £nil).
Post balance sheet events
See Note 28.
Outlook and future developments
Refer to final section within the Investment advisors report.
Annual General Meeting
In line with the requirements of the Companies Act 2006,
the Company will hold an Annual General Meeting on
7 September 2023 at 10.00am. The Notice convening the
AGM is contained in the separate circular posted together
with this Annual Report. The Directors consider that all of
the resolutions to be proposed are in the best interests of the
Company and it is their recommendation that shareholders
support these proposals as they intend to do so in respect of
their own shareholdings.
Independent Auditor
BDO LLP has expressed its willingness to continue in office as
Independent Auditor and aresolution to re-appoint them will
be put to shareholders at the AGM.
Disclosure of information to the Independent Auditor
Each of the Directors at the date of the approval of this report
confirms that:
(i) so far as the Director is aware, there is no relevant audit
information of which the Company’s Independent Auditor
are unaware; and
(ii) the Director has taken all steps that he ought to have
taken as Director to make himself aware of any relevant
information and to establish that the Company’s
Independent Auditor are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the
Companies Act 2006.
In accordance with Section 489 of the Companies
Act 2006, aresolution to re-appoint BDO LLP as the
Company’s Independent Auditor will be put forward at the
forthcoming AGM.
By order of the Board
Cyrus Ardalan
Chairman
6 June 2023
Directors’ report (continued)
58 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
The Corporate Governance Statement forms part of the Directors’ Report. The Board is committed to high standards of
corporate governance.
Statement of compliance
The Board has considered the Principles and Provisions of the AIC Code of Corporate Governance (the ‘AIC Code’). The AIC Code
addresses the Principles and Provisions set out in the UK Corporate Governance Code 2018 (the ‘UK Code’), as well as setting out
additional Provisions on issues that are of specific relevance to the Company.
The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council, provides more relevant information to shareholders.
The Company has complied with the Principles and Provisions of the AIC Code.
The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them relevant for investment companies.
The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as
set out below.
The UK Corporate Governance Code includes provisions relating to:
UK Code provision Explanation
Remuneration of
executive Directors
As an externally managed investment company, the Board does not include any executive Directors.
Assuch,the UK Code’s principles in respect of executive Directors’ remuneration are not applicable.
The role of the
chief executive
As an externally managed investment company, the Board does not include any executive Directors.
The need for an internal
audit function
As explained in the Report of the Audit Committee, this is not considered to be appropriate given the nature and
circumstances of the Company. The Audit Committee keeps the needs for an internal function under periodic review.
The Company is an externally managed investment company. All the Company’s day-to-day management and administrative
functions are outsourced to third parties, as explained in the Directors’ Report. For the reasons set out in the AIC Code, the Board
considers these provisions are not relevant to the position of the Company, being an externally managed investment company and
the Company does not therefore comply with them.
Corporate governance statement
LXi REIT plc Annual Report 2023 59
Governance Financial Statements Additional InformationStrategic ReportOverview
LEADERSHIP
The Board of Directors
The Board is responsible for the effective stewardship of
the Company’s affairs. Investment policy and strategy
are determined by the Board. It is also responsible for the
borrowing policy, dividend policy, public documents such
as the reports and financial statements and corporate
governance matters. In order to enable them to discharge their
responsibilities, the Board has full and timely access to relevant
information. No formal schedule of matters reserved to the
Board has been adopted, since the board effectively supervises
all aspects of the Company’s operations.
Composition of the Board
At the date of this report, the Board consists of six non-
executive Directors, including the Chairman, of whom four are
male and two are female and two Board members are of an
ethnic minority.
Following the completion of the merger with Secure Income
REIT plc Nick Leslau and Sandy Gumm were appointed as
Non-Executive Directors with effect from 6 July 2022. On
15 July 2022 and 19 July 2022 respectively, Jeannette Etherden
and Patricia Dimond retired from the Board. Hugh Seaborn is
the Senior Independent Director.
The Board believes that during the year ended 31 March 2023 its
composition was appropriate for an investment company of the
Company’s nature and size. All of the Directors are independent
of the Investment Advisor and AIFM. However, as disclosed in
the Company’s Prospectus and Circular dated 1 June 2022, Nick
Leslau and Sandy Gumm were not deemed independent upon
completion of the Merger, due to their relationship with the
Investment Advisor of Secure Income REIT. Nick Leslau is also
deemed non-independent due to the size of his shareholding.
All of the Directors are able to allocate sufficient time to the
Company to discharge their responsibilities effectively.
The Directors have abroad range of relevant experience to
meet the Company’s requirements and their biographies are
given in the Board of Directors section of this Annual Report.
The Board recognises the benefits to the Company of having
longer serving Directors together with progressive refreshment
of the Board in line with corporate governance best practice.
There is no fixed policy regarding tenure of directorships.
The Board has adopted asuccession plan that allows for
agradual refreshment. Accordingly, the Board may decide to
recommend the Director with more than nine years’ service for
re-election should the need arise.
All the Directors will retire and offer themselves for election
or re-election at the AGM of the Company to be held on
7September 2023. The Board recommends all the Directors
for re-election for the reasons highlighted above and in the
performance appraisal section of this report.
The Directors have appointment letters which do not provide
for any specific term. In accordance with the AIC Code the
Directors are subject to annual re-election. Copies of the
Directors’ appointment letters are available on request from
the Company Secretary. Upon joining the Board, any new
Director receives an induction and relevant training is available
to Directors on an ongoing basis.
A procedure has been adopted for Directors, in the furtherance
of their duties, to take independent professional advice at the
expense of the Company. All Directors have access to the advice
of the Company Secretary on an ongoing basis.
A policy of insurance against Directors’ and officers’ liabilities is
maintained by the Company.
Board committees
The Company has established an Audit Committee which
is chaired by John Cartwright and consists of the three
independent non-executive Directors. Areport of the Audit
Committee is included in this Annual Report. The Board
considers that the members of the Audit Committee have the
requisite skills and experience to fulfil the responsibilities
of the Audit Committee. The Audit Committee examine the
effectiveness of the Company’s risk management and internal
control systems and reviews the Interim Report and the Annual
Report. It also reviews the scope, results, cost effectiveness,
independence and objectivity of the Independent Auditor.
The Company has established aManagement Engagement
Committee which is chaired by Ismat Levin and consists of
all the independent Directors. The Management Engagement
Committee’s principal duties are to consider the terms of
appointment of the Investment Advisor and the AIFM and it
annually reviews those appointments and the main terms of
the Investment Management Agreement and the Investment
Advisory Agreement. The Management Engagement Committee
reviews the performance and fees payable to the other key
service providers to the Company and makes recommendations
to the Board regarding those appointments.
The Company has established aNomination Committee which
is chaired by Cyrus Ardalan and consists of all the Directors.
The Nomination Committee has been established for the
purpose of reviewing the Company’s succession plan and
identifying and nominating candidates for the office of director
of the Company. The Nomination Committee considers job
specifications and assesses whether candidates have the
necessary skills and time available to devote to the job. In
considering these matters the Committee takes into account
the desirability of achieving diversity to the extent possible.
Each Committee has adopted formal terms of reference,
which are reviewed on aregular basis, and copies of these are
available on the Company’s website or on request from the
Company Secretary.
Corporate governance statement (continued)
60 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
In addition to the formal Committees outlined above, a property advisory working group has also been set up, comprising Hugh
Seaborn (chair), John Cartwright and Nick Leslau. The purpose of this group is to review potential acquisitions and disposals.
The group discusses and challenges proposals rather than making recommendations. All transactions are submitted to the
Board for approval.
Meeting attendance
During the year, the Directors have attended the following meetings.
Regular Board Audit Committee
Management
Engagement
Committee
Nomination
Committee
Number of formal meetings held 4 4 0 2
Cyrus Ardalan 4/4 4/4 0/0 2/2
Hugh Seaborn 3/4 3/4 0/0 1/2
Ismat Levin 4/4 4/4 0/0 1/2
John Cartwright 4/4 4/4 0/0 1/2
Patricia Dimond
1
1/1 1/1 0/0 1/1
Jan Etherden
2
1/1 1/1 0/0 1/1
Sandy Gumm
3
3/3 n/a n/a 1/1
Nick Leslau
3
3/3 n/a n/a 1/1
1 Retired from the Board on 19 July 2022
2 Retired from the Board on 15 July 2022
3 Appointed to the Board on 6 July 2022
In addition to those listed above, the Company held anumber of Board and Committee meetings to deal with administrative
matters, ad hoc decisions and the formal approval of documents and transactions.
Conflicts of Interest
The Directors have declared any conflicts or potential conflict of interest to the Board which has the authority to approve such
situations. The Company Secretary maintains the Register of Directors’ Conflicts of Interests which is reviewed at each quarterly
board meeting and when changes are notified. The Directors advise the Company Secretary and Board as soon as they become
aware of any conflicts of interest. Directors who have conflicts of interest do not take part in discussions which relate to any of
their conflicts.
It is the responsibility of each individual Director to avoid an unauthorised conflict arising. Directors must request authorisation
from the Board as soon as they become aware of the possibility that aconflict may arise. The Board is responsible for considering
Directors’ requests for authorisation of conflicts and for deciding whether or not the relevant conflict should be authorised. When
the Board is deciding whether to authorise aconflict or potential conflict, only Directors who have no interest in the matter being
considered are able to participate in the relevant decision, and in taking the decision the Directors must act in away they consider,
in good faith, will be most likely to promote the Company’s success. The Board are able to impose limits or conditions when giving
authorisation if they think this is appropriate in the circumstances. The Directors must also comply with the statutory rules
requiring company directors to declare any interest in an actual or proposed transaction or arrangement with the Company.
LXi REIT plc Annual Report 2023 61
Governance Financial Statements Additional InformationStrategic ReportOverview
THE BOARD OF DIRECTORS
The Directors are responsible for the determination of the Company’s investment policy and have overall responsibility for
the Company’s activities, including the review of investment activity and performance and the control and supervision of the
Company’s service providers. All of the Directors are non-executive and are independent of the AIFM and the Investment Advisor.
Hugh Seaborn CVO
Independent Non-Executive Director and
SeniorIndependentDirector
Appointed: 13 January 2022 appointed to the Board; 11 March 2022 appointed
SeniorIndependent Director
Length of service: One year
Hugh brings over 35 years of real estate experience. He spent 13 years as anon-executive
at TR Property Investment Trust plc, including four years as Chair, and is currently
the CEO of Cadogan. He founded and chairs two business improvement districts,
The Knightsbridge Partnership and The King’s Road Partnership, and is Chair of the
Knightsbridge Business Group. Previously, he was CEO of The Portman Estate and
prior to that Director and Head of Investment Management at CBRE. Formerly, Hugh
has been amember of the Council of the Duchy of Lancaster, Chair of the Westminster
Property Association, Chair of the Estates Business Group, and amember of the Property
Advisory Committee for the Natural History Museum. He is aChartered Surveyor.
Committee membership
• Audit Committee
• Management Engagement Committee
• Nomination Committee
Cyrus Ardalan
Independent Non-Executive Chairman
Appointed: 13 January 2022 appointed to the Board; 11 March 2022 appointed Chairman
Length of service: One year
Cyrus is ahighly experienced international investment banker with well-established
corporate governance expertise and successful credentials as chairman. His career
in capital markets spans over 40 years during which he has held senior executive
and non-executive roles at leading global banks. He is currently the Chairman of the
Board at OakNorth Bank and was previously non-executive director and Chairman
of anumber of institutions, including Citigroup Global Markets, the International
Finance Facility for Immunisation and the International Capital Markets Association.
Cyrus spent 15 years at Barclays Bank as Vice Chairman overseeing anumber of
areas including the bank’s Public Policy and Government Relations units. Prior
to this, he held arange of senior positions at Paribas and The World Bank.
Committee membership
• Management Engagement Committee
• Nomination Committee (Chair)
Corporate governance statement (continued)
62 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
No external appointments during the year were considered to be significant for the relevant directors, taking into account the
expected time commitment and nature of these roles.
John Cartwright
Independent Non-Executive Director
Appointed: 27 January 2017
Length of service: Six years
John Cartwright was formerly Chief Executive of AREF from 2009 to 2019.
Hisresponsibilities as Chief Executive of AREF were to represent and promote
the interests of members, promote best practice in fund governance and ensure
the smooth running of the association. Prior to this, John was with M&G Real
Estate (formerly PRUPIM) for nearly 35 years in avariety of roles; latterly as
Head of Institutional and Retail Funds and amember of PRUPIM’s Board and
Investment Committee. He has more than 20 years’ experience of managing
pooled and segregated accounts for both retail and institutional investors.
Johnisalso amember of the Investment Committee of Lothbury Property Trust.
Committee membership
• Audit Committee (Chair)
• Management Engagement Committee
• Nomination Committee
Sandy Gumm
Non-Independent Non-Executive Director
Appointed: 6 July 2022
Length of service: Less than one year
Sandy Gumm, Bec, CA (ANZ), is an Australian qualified Chartered Accountant with
over 31 years’ experience. She qualified as a Chartered Accountant in 1992 and worked
for KPMG for nine years in Sydney and London before becoming Group Financial
Controller of Burford Holdings Plc, where Nick Leslau was Chief Executive, in 1995.
She was Finance Director at the time that Prestbury Group Plc was established in
1997, and in 2007 became Chief Operating Officer of Prestbury which was investment
advisor to a series of real estate business including Secure Income Reit Plc. Sandy
was a director of Secure Income REIT plc and all of its UK subsidiaries throughout
the time that it was listed and was its Company Secretary during that time.
Committee membership
• Nomination Committee
Ismat Levin
Independent Non-Executive Director
Appointed: 13 January 2022
Length of service: One year
Ismat Levin has 28 years’ experience in commercial, international growth and legal
technology-led software industries across NASDAQ-listed and private equity contexts,
including as aBoard observer. She is currently Vice President and Group General
Counsel at Synamedia Limited. Before this, Ismat spent almost 20 years at NDS Group
as Vice President and Group General Counsel as it grew from astart-up investment
owned by News Corporation, to being aNASDAQ listed company for 10 years, to
being sold to Cisco Systems, Inc. for $5bn. Ismat began her career at Dentons LLP.
Committee membership
• Audit Committee
• Management Engagement Committee (Chair)
• Nomination Committee
Nick Leslau
Non-Independent Non-Executive Director
Appointed: 6 July 2022
Length of service: Less than one year
Nick Leslau, BSc (Hons) Est Man, FRICS, until the Merger was the Chairman and
majority shareholder of Prestbury Investment Partners Limited, investment adviser
to the Secure Income REIT plc group of companies (‘SIR Group’). Nick is aFellow
of the RICS, who has been Chairman and Chief Executive of Prestbury Investment
Holdings Limited since it commenced business in 2000. He was Chief Executive of
Burford Holdings Plc for approximately ten years up to 1997 and Group Chairman and
Chief Executive of Prestbury Group Plc from 1998. He has sat on many quoted and
unquoted company boards including, most recently, Max Property Group Plc, and
is amember of the Bank of England Property Forum. Nick was adirector of Secure
Income REIT plc and many of its UK subsidiaries throughout the time that it was listed.
Committee membership
• Nomination Committee
LXi REIT plc Annual Report 2023 63
Governance Financial Statements Additional InformationStrategic ReportOverview
EFFECTIVENESS
Performance appraisal
A formal annual performance appraisal process is performed
on the Board, the committees, the individual Directors and the
Company’s main service providers on an annual basis.
The Board annual board appraisal was undertaken externally
by Lintstock who reviewed the effectiveness of the Board and
Committees. The results were reviewed by the Chair and SID
and discussed with the Nomination Committee. A separate
appraisal of the Chairman has been carried out by the other
members of the Board and the results reported back by the
Senior Independent Director to the Chairman. The results of the
performance evaluation were positive and demonstrated that
the Directors showed the necessary commitment and expertise
for the fulfilment of their duties.
A review of the Company’s key service providers was
undertaken by the Management Engagement Committee.
The review comprised open and closed ended questions and
included areview of each service providers fees to ensure they
remained competitive. Following the review process the Board
agreed that the performance and fees of each service provider
was satisfactory and that it was in the Company’s best interest
that the engagement of each service providers continue for the
foreseeable future.
Board diversity
The Company’s policy is that the Board should have a broad
range of skills. While we will always endeavour to meet the
various targets; commercial skills and experience is paramount
to the Board. Consideration is given to the recommendations
of the AIC Code and other guidance on boardroom diversity.
In accordance with LR 9.8.6R (9)(a), the below table
summarises the gender and ethnicity of our current Board
as at 31 March 2023. We do not currently comply with the
requirements that at least 40% of individuals on the board
are women or that at least one of the senior board positions is
held by a woman. We remain mindful of these requirements
through our succession planning and will endeavour to comply
in the future. However, the Board believes that cognitive
diversity is of great importance and is comfortable that the
Board is made up of a diverse group of individuals with different
backgrounds and skillsets. The Board is fully compliant with the
requirement to have at least one individual on its board from an
ethnic minority.
Gender identity or sex
Number of
Board members
Percentage of the
board
Number of senior
positions on the
board (SID and
chair)
Men 4 66.7% 2
Women 2 33.3% –
Other – – –
Not specified/
prefer not to say
– – –
Ethnic background
Number of
Board members
Percentage of the
board
Number of senior
positions on the
board (SID and
chair)
White British
orother White
(including
minority white
groups)
4 66.8% 1
Mixed/Multiple
Ethnic Groups
– – –
Asian/Asian
British
1 16.6% –
Black/African/
Caribbean/
BlackBritish
– – –
Other 1 16.6% 1
Not specified/
prefer not to say
– – –
Corporate governance statement (continued)
64 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
ACCOUNTABILITY
Internal control
The AIC Code requires the Board to review the effectiveness
of the Company’s system of internal controls. The Board
recognises its ultimate responsibility for the Company’s system
of internal controls and for monitoring its effectiveness. The
system of internal controls is designed to manage rather than
eliminate the risk of failure to achieve business objectives.
It can provide only reasonable assurance against material
misstatement or loss. The Board has undertaken areview
of the Company’s internal controls framework. The Board
believes that the existing arrangements present an appropriate
framework to meet the internal control requirements. By
these procedures the Directors have kept under review the
effectiveness of the internal control system throughout the
year and up to the date of this report.
Risk management
The risk management framework established by the Board has
been designed to identify, evaluate and mitigate the significant
risks faced by the Company. Arisk management framework
can only provide reasonable, not absolute, assurance. The
Board has contractually delegated the management of the
investment portfolio, the registration services, administrative
services and other services to third party service providers and
reliance is therefore placed on the internal controls of those
service providers. Aformal risk assessment is performed on at
least an annual basis which includes the use of adetailed risk
assessment programme. The principal risks identified and the
mitigation of those risks are disclosed in the Strategic Report in
this Annual Report.
Risk appetite
The Board’s risk appetite is low. This is aligned with the
Company’s investment objective and policy for which the
Board has ultimate responsibility. The full investment objective
and policy is included in the Strategic Report in this Annual
Report. The Group selectively invests predominantly in UK
commercial property assets let to awide range of strong tenant
covenants across adiverse range of property sectors. The
Group also invests in fixed price forward funded developments
whilst not undertaking any direct development activity nor
assuming direct development risk and does not undertake
speculative developments.
Financial aspects of internal control
The Directors are responsible for the internal financial control
systems of the Company and for reviewing their effectiveness.
These aim to ensure the maintenance of proper accounting
records, the reliability of the financial information upon which
business decisions are made and which is used for publication
and that the assets of the Company are safeguarded. As
stated above, the Board has contractually delegated to
external firms the services the Company requires, but it is fully
informed of the internal control framework established by
the AIFM, the Investment Advisor, the Administrator and the
Company’s Depositary to provide reasonable assurance on the
effectiveness of internal financial controls.
The key procedures include review of management accounts,
monitoring of performance at quarterly Board meetings,
segregation of the administrative function from investment
management, maintenance of appropriate insurance and
adherence to physical and computer security procedures.
Other aspects of internal control
The Board holds quarterly meetings, plus additional meetings
as required. Between these meetings there is regular contact
with the AIFM, the Investment Advisor, the Company Secretary
and the Administrator.
The Board has agreed policies on key operational issues.
The Company’s key service providers report to the Board
on operational and compliance issues. The AIFM and the
Depositary provide reports to the Board, which are reviewed at
the quarterly Board meetings.
The Administrator provides quarterly management accounts to
the Board and updated Group budgets at least annually, which
enables the Board to assess the financial position and prospects
of the Company. Additional ad hoc reports are received as
required and Directors have access at all times to the advice
and services of the Company Secretary, which is responsible to
the Board for ensuring that Board procedures are followed.
This contact with the key service providers enables the Board
to monitor the Company’s progress towards its objectives
and encompasses an analysis of the risks involved. The
effectiveness of the Company’s risk management and internal
controls systems is monitored and aformal review, utilising
adetailed risk assessment programme has been completed.
This has included consideration of the Administrator’s and the
Registrar’s internal controls report. There are no significant
findings to report from the review.
LXi REIT plc Annual Report 2023 65
Governance Financial Statements Additional InformationStrategic ReportOverview
Principal and emerging risks
The Directors confirm that they have carried out arobust
assessment of the principal and emerging risks facing the
Company, including those that would threaten its business
model, future performance, solvency or liquidity. The principal
risks and how they are being managed is set out in the Strategic
Report. As part of its risk process, the Board seeks to identify
emerging risks to ensure that they are effectively managed as
they develop and recorded in the risk matrix. Further details of
the principal risks are on page 48.
RELATIONS WITH SHAREHOLDERS
ANDSTAKEHOLDERS
Shareholder relations
The Board and the Investment Advisor continues to develop
relationships with shareholders through regular updates to the
market and through meetings with shareholders.
At Board meetings, regular investor feedback is provided by the
Investment Advisor and the Broker and the views of existing or
potential shareholders about the Company are discussed.
If any shareholder wishes to contact the Chairman or Senior
Independent Director directly they should contact the Company
Secretary whose details are given in the Company Information.
Annual General Meeting
At least twenty-one days’ notice shall be given to all the
members and to the Independent Auditor. All other general
meetings shall also be convened by not less than twenty-one
days’ notice to all those members and to the Independent
Auditor unless the Company offers members an electronic
voting facility and aspecial resolution reducing the period of
notice to not less than fourteen days has been passed, in which
case ageneral meeting may be convened by not less than
fourteen days’ notice in writing. Aspecial resolution will be
proposed at the AGM to reduce the period of notice for general
meetings other than the Annual General Meeting to not less
than fourteen days.
The Notice sets out the business of the AGM and resolutions are
explained in the circular containing the notice of AGM.
Separate resolutions are proposed for each substantive issue.
The Company’s AGM will be held on 7 September 2023.
Relations with other stakeholders are described in the s.172
statement on page 46.
Corporate governance statement (continued)
66 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
Role of the Audit Committee
The AIC Code recommends that Boards should have an
established Audit Committee consisting of at least three, or in
the case of smaller companies, two independent non-executive
directors. The Board is required to satisfy itself that the Audit
Committee members have recent and relevant experience.
The role of the Audit Committee is to ensure that the Company
maintains the highest standards of integrity in financial
reporting, risk management and internal controls. The role
and responsibility of the Audit Committee is set out in formal,
written terms of reference covering certain matters in line with
the AIC Code. Copies of the terms of reference are available
from the Company Secretary.
The Audit Committee meets formally at least four times
ayear for the purpose of performing its main roles and of
considering the appointment, independence and objectivity,
and remuneration of the Independent Auditor and to review the
annual accounts, half-yearly financial report and the audit plan
for the financial year.
The Audit Committee also reviews the Company’s internal
financial controls and its internal control and risk management
systems. Where non-audit services are provided by the
Independent Auditor, full consideration of the financial and
other implications on the independence of the Independent
Auditor arising from any such engagement are considered
before proceeding. The Audit Committee has considered the
non-audit work of the Independent Auditor during the year and
does not consider that this compromises its independence.
The Company complies with the AIC Code. The following points
apply to the particular circumstances of the Company:
• The Audit Committee periodically reviews the need for an
internal audit function and considers that this is not required
given the nature and circumstances of the Company. The
Audit Committee keeps the needs for an internal audit
function under periodic review.
• The Chairman of the Company was a member of the Audit
Committee during the year (but not its Chairman). The Board
and the Audit Committee believe that this was appropriate
as he has recent and relevant financial experience and he
remains independent.
As noted in the Directors’ report on page 56, after the year end
the Directors became aware that certain dividends paid since
the Merger had been made otherwise than in accordance with
the Companies Act 2006.
The Audit Committee has required certain enhancements to
the process are made that are designed to avoid a similar issue
arising in future.
Composition
The Committee reviewed its membership following the
Merger. Given that both Sandy Gumm and Nick Leslau were
deemed non-independent, they are not members of the Audit
Committee. On this basis the Committee agreed that the whole
Board would not sit on the Audit Committee, therefore at that
time Cyrus Ardalan, Chairman of the Board, stepped down
from the Committee. Three of the independent non-executive
directors of the Company are members of the Audit Committee.
The Chairman of the Committee is John Cartwright.
Relevant skills and experience
The members of the Audit Committee have recent and relevant
financial experience. The Audit Committee membership
includes individuals with substantial experience of the financial
matters of listed companies and substantial experience of the
property sector as described in detail in the Board of Directors
section. This blend of skills and experience enables the Audit
Committee to fulfil its responsibilities effectively.
Meetings
During the year four Audit Committee meetings were held. The
entire Committee were in attendance at those meetings.
Report of the Audit Committee
LXi REIT plc Annual Report 2023 67
Governance Financial Statements Additional InformationStrategic ReportOverview
Activities of the Audit Committee
During the year, the Audit Committee carried out its
responsibilities in accordance with the terms of reference.
Details of the activities of the Audit Committee during
the year were:
Financial statements
The Audit Committee has met with the Independent Auditor
and reviewed the Annual Report in order to advise the Board
on the contents, in particular the Audit Committee has advised
the Board that taken as awhole, it is fair and balanced and
provides the information necessary for shareholders to assess
the Company’s performance, business model and strategy. The
Audit Committee has recommended the approval of the Annual
Report to the Board. Further details of the Audit Committee’s
monitoring of the financial statements and significant
accounting matters are set out below.
Valuations
The Audit Committee has reviewed both the interim and
full year valuation reports from Knight Frank LLP; including
meeting with the valuers, and recommended to the Board
the valuations to be included in both the Interim and Annual
Report. In doing so, the Audit Committee has monitored the
effectiveness of the Company’s valuation policies and methods.
Internal Control
With regard to monitoring internal control, the Audit
Committee has:
• continued to monitor and review whether an internal
audit function is required and reasons for the absence are
explained above;
• monitored the Company’s accounting and financial internal
control systems, and those of the Investment Advisor,
Administrator and Depositary;
• monitored the Company’s procedures for ensuring
compliance with regulatory and financial reporting
requirements and its relationship with the relevant
regulatory authorities; and
• reviewed the Investment Advisor’s detection of fraud and
whistleblowing arrangements.
Financial statements and significant accounting matters
The Audit Committee monitors the integrity of the financial
information published in the Interim and Annual Report and
considers whether suitable and appropriate judgments in
respect of areas which could have amaterial impact on the
financial statements, have been made. It actively engages with
the Independent Auditor to assess these significant judgments
and the systems and processes in place to form these
significant judgments. The Audit Committee considered the
following to be the significant areas of judgment which could
materially impact the financial statements for the year ended
31 March 2023:
1. Investment property valuation
The evaluation of investment property is the most material
matter in the financial statements. Knight Frank LLP has been
appointed to value the Company’s property investments in
accordance with the RICS requirements on a bi-annual basis.
Knight Frank LLP are appropriately qualified and independent.
The Audit Committee reviewed a copy of the valuation once it
had been completed and has received a detailed report from
the Independent Valuer. The Audit Committee has reviewed the
assumptions underlying the property valuations and concluded
that the valuation at the Company’s year end is appropriate.
2. SIR Merger Accounting
The evaluation of whether the SIR merger should be accounted
for as a business combination or an investment property
acquisition was an area of significant judgement. The Board
solicited advice from lawyers and accounting experts who
supported the conclusion that an investment property
acquisition was the most accurate accounting treatment. The
Audit Committee has reviewed the assumptions underlying
the accounting for the transaction and concluded that
the treatment as a property acquisition during the year
is appropriate.
Independent Auditor
BDO LLP was selected as the Company’s Independent Auditor
at the time of the Company’s launch in 2017 following a formal
tender process and review of the Independent Auditor’s
credentials. The appointment of the Independent Auditor is
reviewed annually by the Audit Committee and the Board and
is subject to approval by shareholders. In accordance with the
FRC guidance, the audit will be put out to tender within ten
years of the initial appointment of BDO LLP. During the year the
individual responsible for the audit has rotated in accordance
with rotation requirements.
Statutory Audit Services compliance
The Company confirms compliance with the provisions of
the Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities) Order 2014,
which relates to the frequency and governance of tenders
for the appointment of the external auditor for the year to
31 March 2023. The Committee will undertake acompetitive
tender for the external auditor during the year to 31 March 2027
to cover the financial years ending 31 March 2027 onwards at
the latest and as required by regulation.
Effectiveness of Independent Auditor
The Audit Committee is responsible for reviewing the
effectiveness of the external audit process. The Audit
Committee received apresentation of the audit plan from the
Independent Auditor in respect of the year under review and
apresentation of the results of the audit following completion
of the main audit testing.
Report of the Audit Committee (continued)
68 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
The Audit Committee reviews the Independent Auditor
following the presentation of the results of the audit. The
review includes adiscussion of the audit process and the
ability of the Independent Auditor to fulfil its role. The Audit
Committee has agreed that the re-appointment of the
Independent Auditor should be recommended to the Board and
the shareholders of the Company.
During the year, the Audit Committee met key members of
the senior audit team and BDO LLP formally confirmed its
independence, as part of the annual reporting process. The
Audit Committee liaises regularly with the lead audit partner,
to discuss any issues arising from the audit as well as its
costeffectiveness.
Provision of non-audit services
The Audit Committee has put apolicy in place on the supply of
any non-audit services provided by the Independent Auditor.
Such services are considered on acase-by-case basis and
may only be provided to the Company if the provision of such
services is at areasonable and competitive cost and does not
constitute aconflict of interest or potential conflict of interest
which would prevent the Independent Auditor from remaining
objective and independent.
BDO LLP was paid fees in respect of the following non-audit
services in the year:
Non-audit
serviceprovided
Rationale for using the
Independent Auditor Fee
Reporting accountant
services in relation
tothe acquisition
ofSecure Income
REIT plc
Non-recurring service. The work was
performed by ateam independent of
the audit team and the audit team
place no reliance on the output of the
services provided.
£60,000
Interim review Detailed knowledge and
understanding of the business is
required to adequately perform an
interim review of the half-yearly
report. It is standard market practice
to use the Independent Auditor for
this service.
£50,000
The independence of the Independent Auditor was considered
prior to the provision of these services. The Audit Committee
periodically monitors the ratio of non-audit to audit services
to ensure that any fees for permissible non-audit services
does not exceed 70% of the average audit fees paid in the
last three years.
The Audit Committee do not believe that the provision of
the above services affects the independence of BDO LLP,
particularly as the reporting accountant in relation to the
Company’s Prospectus and are non-recurring.
Fair, balanced and understandable financial statements
The Audit Committee has concluded that the Annual Report
for the year ended 31 March 2023, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Company’s business
model, strategy and performance. The Audit Committee has
reported its conclusions to the Board of Directors. The Audit
Committee reached this conclusion through a process of review
of the document, application of their various skills, experience
and knowledge of the business, and enquiries to the various
parties involved in the production of the Annual Report.
John Cartwright
Chairman of the Audit Committee
6 June 2023
LXi REIT plc Annual Report 2023 69
Governance Financial Statements Additional InformationStrategic ReportOverview
Role of the Management Engagement Committee
The Management Engagement Committee meets formally at
least once ayear for the purpose, amongst other things, of
reviewing the performance of the Investment Advisor, the AIFM
and the Company’s other key service providers over the year
and to make appropriate recommendations to the Board. The
Chairman of the Committee is Ismat Levin.
For the purposes of this report, the key service providers whose
performance is reviewed by the Management Engagement
Committee are those listed in the Directors’ Report as Principal
Professional Advisors.
The Management Engagement Committee has conducted
acomprehensive review of the performance of the Investment
Advisor and the Company’s other key service providers. This
has included an assessment of the services provided as well as
the fees paid for the provision of such services.
Meetings
The Management Engagement Committee did not meet during
the financial year due to diary constraints. However, in May
2023 the Committee did meet to consider the performance of
the Investment Advisor and the Company’s other key service
providers in respect to the financial year under review. All
members of the Management Engagement Committee were
present for that meeting.
AIFM and Investment Advisor
The Company has appointed Alvarium Fund Managers (UK)
Limited (formerly LJ Administration (UK) Limited) as the
Alternative Investment Fund Manager (the “AIFM”). The
Company and the AIFM have appointed LXI REIT Advisors
Limited (the “Investment Advisor”) to provide certain services
in relation to the Company and its portfolio.
Review
The Board has delegated the day-to-day running of the
Company to the Investment Advisor pursuant to the terms of
the Investment Advisory Agreement. The Investment Advisory
Agreement is reviewed and amended when necessary to
ensure it reflects the relationship between the Board and the
Investment Advisor.
Under the terms of the Investment Advisory Agreement, the
Investment Advisor, amongst other things, is responsible for
sourcing investment opportunities in line with the Company’s
Investment Policy, the monitoring and management of the
Company’s portfolio and negotiation and supervision of the
Company’s borrowing facilities.
The Investment Advisor has diligently invested available
funds during the year, in line with the Company’s investment
policy, to build adiverse portfolio of high-quality assets that
should provide growing and secure returns to the Company’s
shareholders. Details of the Investment Advisor’s activity and
the Company’s performance in the year have been included in
the Strategic Report.
The collective skillset of the Investment Advisor’s team
contains all the necessary skills and experience to best serve
the interests of the shareholders in performing its delegated
responsibilities.
We are satisfied that the Investment Advisor and the AIFM have
the suitable skills and experience to manage the Company’s
investments and believe that the continuing appointment of
the Investment Advisor and the AIFM is in the best interests of
shareholders as awhole.
In addition, following our review and analysis, we agreed
with the Investment Advisor that the performance of all the
Company’s current professional advisors, as described in the
Directors’ Report, was satisfactory and with the Investment
Advisor’s recommendation, that each be retained until
the next review.
Investment Management and Investment Advisory fees
Under the Investment Management Agreement, the AIFM
receives afee of £24,000 per annum.
No performance fee is payable to the AIFM.
Under the terms of the Investment Advisory Agreement, the
Investment Advisor is entitled to afee payable monthly in
arrears calculated as below:
Market Capitalisation
One twelfth of
relevant percentage
Up to or equal to £500m 0.75%
Between £500m and £2bn 0.65%
Above £2bn 0.55%
No performance fee is payable to the Investment Advisor.
The Management Engagement Committee reviews the
continuing performance and appointment of principal
professional advisors and the Investment Advisor and AIFM
of the Company on at least an annual basis to ensure that
their continuing appointments are in the best interest of the
Company’s shareholders.
A review of the Company’s key service providers was
undertaken by the Management Engagement Committee.
The review comprised open and closed ended questions and
included a review of the quality of their services and fees to
ensure they remained competitive and a review of each service
providers policies and procedures to ensure each service
provider had adequate controls and procedures in place.
As part of this process the Board considered each service
providers’ ability to continue to operate remotely. Following the
review process the Board agreed that the performance and fees
of each service provider was satisfactory and that it was in the
Company’s best interest that the engagement of each service
provider continue.
Ismat Levin
Chairman of the Management Engagement Committee
6 June 2023
Report of the Management Engagement Committee
70 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
Established in 2013, Langham Hall UK Depositary LLP is an FCA
regulated firm that works in conjunction with the Manager and
the Company to act as depositary. Consisting exclusively of
qualified and trainee accountants and alternative specialists,
we safekeep assets of $110bn and deploy our services to over
120 alternative investment funds across various jurisdictions
worldwide. Our role as depositary primarily involves oversight
of the control environment of the Company, in line with the
requirements of the Alternative Investment Fund Managers
Directive (AIFMD).
Our cash monitoring activity provides oversight of all the
Company held bank accounts with specific testing of bank
transactions triggered by share issues, property income
distributions via dividend payments, acquisitions, and third
party financing. We review whether cash transactions are
appropriately authorised and timely. The objective of our asset
verification process is to perform areview of the legal title of all
properties held by the Company and the shareholding of special
purpose vehicles beneath the Company. We test on an ongoing
basis whether the Company is being operated by the Manager
in line with the Company’s prospectus, and the internal control
environment of the Manager. This includes areview of the
Company’s and its subsidiaries’ decision papers and minutes.
We work with the Manager in discharging our duties, holding
formal meetings with senior staff on aquarterly basis and
submit quarterly reports to the Manager and the Company,
which are then presented to the Board of Directors, setting
out our work performed and the corresponding findings
for the period.
In the year ended 31 March 2023 our work included the review
of seven investment property acquisitions, four investment
property disposals, four dividends, three third party
borrowings and the acquisition of Secure Income REIT. Based
on the work performed during this period, we confirm that no
issues came to our attention to indicate that controls are not
operating appropriately.
Joe Hime
Head of Depositary
For and on behalf of Langham Hall UK DepositaryLLP,
London, UK
6 June 2023
Depositary statement
LXi REIT plc Annual Report 2023 71
Governance Financial Statements Additional InformationStrategic ReportOverview
Directors’ remuneration policy
The existing Directors’ Remuneration Policy was approved
at the Company’s Annual General Meeting (‘AGM’) held on
14 July 2021. The provisions set out in this policy apply until
they are next put forward for shareholder approval. The
remuneration policy must be put forward for shareholder
approval at amaximum interval of three years. The next time
the remuneration policy will be put forward for shareholder
approval will be in 2024. In the event of any proposed material
variation to the policy, shareholder approval will be sought for
the proposed new policy prior to its implementation.
Voting on Remuneration Matters
At the AGM on 5 September 2022 the resolution to receive
and approve the directors’ remuneration report for the year
ended 31 March 2022 received the following votes: for 99.82%
(961,381,188 votes); against 0.18% (1,723,726 votes).
At the AGM on 14 July 2021, the remuneration policy received
the following votes: for 99.75% (361,007,784 of votes); 0.25%
votes against (913,612 votes).
Fees
The Directors’ fees are determined within the limits set out in
the Company’s Articles of Association and they are not eligible
for bonuses, pension benefits, share benefits, share options,
long-term incentive schemes or other benefits.
The Directors’ fees are paid at fixed annual rates and do not
have any variable or performance related elements. The Board
may determine that additional remuneration may be paid, from
time to time, to any one or more Directors in the event such
Director or Directors are requested by the Board to perform
extra or special services on behalf of the Company.
The non-executive Directors shall be entitled to fees at such
rates as determined by the Board subject to the maximum
aggregate fee limit of £500,000 set out in the Company’s
Articles of Association.
The Directors shall also be entitled to be reimbursed for all
expenses incurred in performance of their duties. These
expenses are unlikely to be of asignificant amount. Fees are
payable from the date of appointment as aDirector of the
Company and cease on date of termination of appointment.
The Board will not pay any incentive fees to any person to
encourage them to become aDirector of the Company. The
Board may, however, pay fees to external agencies to assist the
Board in the search and selection of Directors.
Current and future policy
Component Director Purpose of reward Operation
Annual fee Chairman of the
Board
For services as
Chairman of aplc
Determined by
the Board
Annual fee Other Directors For services as
non-executive
Directors of aplc
Determined by
the Board
Additional
fee
Chairman of the
Audit Committee
For additional
responsibility and
time commitment
Determined by
the Board
Additional
fee
Chairman of the
Management
Engagement
Committee
For additional
responsibility and
time commitment
Determined by
the Board
Additional Senior
Independent
Director
For additional
responsibility and
time commitment
Determined by
the Board
Expenses All Directors Reimbursement of
expenses incurred in
the performance of
duties
Submission of
appropriate
supporting
documentation
No director is involved in setting their own remuneration and
the Company’s conflict of interest policy and procedures (see
page 61) apply to the Board when undertaking their duties.
Statement of consideration of conditions elsewhere
intheCompany
The Company has no employees. Therefore, the process of
consulting with employees on the setting of the remuneration
policy is not applicable.
Review
The Directors’ remuneration is reviewed on an annual basis
by the Board and any changes are subject to approval by the
Board. The Board considered their level of fees and agreed to
increase their fees with effect from 1 April 2023 to reflect the
increased size and complexity of the Company following the
Merger, the level of time commitment by the Board and to bring
the Board fees in line with the Board fees of other similar sized
Real Estate Investment Trusts.
The remuneration payable to the Directors takes into account
a number of factors, inter alia, the experience of the Directors,
the complexity of the Company and prevailing market rates for
the real estate investment trust sector.
Effective date
The Remuneration Policy put to shareholders at the
Annual General Meeting held on 14 July 2021 was effective
from that date.
Directors’ remuneration report
72 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
Directors’ service contracts
The Directors do not have service contracts with the Company.
The Directors are not entitled to compensation on loss of office.
The Directors have appointment letters which do not provide
for any specific term. In accordance with the AIC Code, they are
subject to annual re-election.
Statement of consideration of shareholders’ views
The Company is committed to ongoing Shareholder dialogue
and takes an active interest in voting outcomes. If there are
substantial votes against resolutions in relation to Directors’
remuneration, the Company will seek the reasons for any such
vote and will detail any resulting actions in the next Directors’
remuneration report.
The Directors’ remuneration report (excluding the Directors’
remuneration policy) will be put forward for shareholder
approval at the AGM to be held on 7 September 2023.
Annual statement on policy implementation
As the Board consists only of six non-executive Directors,
it does not consider it necessary to establish aseparate
remuneration committee. The Board as awhole consider the
pay awards for the Directors with recommendations on level of
pay made by the Nomination Committee.
Remuneration
The Company currently has six non-executive Directors.
The rates of Directors’ remuneration can be found below:
Role
Remuneration
1 April 2023
£
Remuneration
1 April 2022
£
Chairman’s fee 120,000 100,000
Director’s fee 50,000 40,000
Senior Independent Director
additionalfee
10,000 8,000
Audit Committee Chair additional fee 7,500 5,000
Management Engagement Committee
Chair additional fee
5,000 3,000
Nomination Committee Chair
additionalfee
5,000 –
The Board believes that this fee structure appropriately reflects
the prevailing market rates for the Company’s complexity and
size, and will also enable the Company to attract appropriately
experienced additional Directors in the future.
Performance
The following graph compares, since IPO, the total shareholder
return of the Company’s ordinary shares relative to areturn on
ahypothetical holding over the same period in the FTSE EPRA/
NAREIT UK Index and the FTSE All share Index. These indices
have been chosen by the Board as the most appropriate to
compare the Company’s performance.
FEB
2017
AUG
2018
AUG
2019
AUG
2017
FEB
2018
FEB
2019
FEB
2021
FEB
2023
AUG
2020
AUG
2021
FEB
2022
AUG
2022
FEB
2020
LXi REIT FTSE ALL SHARE FTSE EPRA/NAREIT UK
50
75
100
125
150
175
200
TOTAL SHAREHOLDER RETURN
Total shareholder return is the measure of returns provided by
acompany to shareholders reflecting share price movements
and assuming reinvestment of dividends.
There are no taxable benefits payable by the Company other
than certain expenses which may be deemed to be taxable.
None of the above fees was paid to third parties.
A non-binding ordinary resolution to approve the Directors’
Remuneration Report (excluding the Remuneration
Policy) contained in the Annual Report for the year ended
31 March 2023 will be put forward for approval at the
Company’s AGM to be held on 7 September 2023.
LXi REIT plc Annual Report 2023 73
Governance Financial Statements Additional InformationStrategic ReportOverview
SINGLE TOTAL FIGURE OF REMUNERATION
(
AUDITED
)
Date of appointment
tothe Board
Fees for the year
to 31March 2023
£
Fees for the year
to 31March 2022
£
Fees for the year
to 31March 2021
£m
% annualised change
in Directors fees
1
2023 2022 2021
Cyrus Ardalan (Chairman)
2
13 January 2022 100,000 21,370 – 0% n/a –
Stephen Hubbard
3
27 January 2017 – 70,890 75,000 – –5.5% 50.0%
Hugh Seaborn 13 January 2022 48,000 8,986 – 0% n/a –
John Cartwright
4
(AC Chairman) 27 January 2017 43,493 40,000 42,000 8.7% -4.8% 13.5%
Patricia Dimond
5
1 January 2020 13,562 45,000 43,000 n/a 4.7% n/a
Jan Etherden
6
27 January 2017 12,488 43,000 43,000 n/a 0% 22.9%
Ismat Levin
7
(MEC Chairman) 13 January 2022 42,129 8,548 – 5.3% n/a –
Colin Smith OBE
8
27 January 2017 – 37,808 40,000 – n/a 25.0%
Sandy Gumm
9
6 July 2022 29,480 – – n/a – –
Nick Leslau
9
6 July 2022 29,480 – – n/a – –
1 In accordance with The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019, these columns have been included to show the annual
percentage change over the preceding financial year by comparison to the current financial year in respect of each Director that has served in their relevant role for aminimum of two
financial years. The Board will publish this annual percentage change cumulatively each year going forward until there is an annual percentage change over the five financial years
preceding the relevant financial year in accordance with the new regulation. These fees exclude taxable benefits which could vary substantially as they reflect expenses incurred
whilst carrying out the board’s duties
2 Appointed Chairman on 11 March 2022
3 Resigned on 11 March 2022
4 Appointed as Audit Chairman on 19 July 2022
5 Resigned on 19 July 2022
6 Resigned on 15 July 2022
7 Appointed as MEC Chairman on 15 July 2022
8 Resigned on 11 March 2022
9 Appointed on 6 July 2022
Directors’ remuneration report (continued)
74 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
Relative importance of spend on pay
The following table sets out the total level of Directors’
remuneration compared to the distributions to shareholders
by way of dividends, and the management fees and other
expenses incurred by the Company.
Year ended
31March 2023
Year ended
31March 2022
Directors’ fees £318,630 £275,602
Investment Advisor’s fee £12,862,123 £7,083,078
Dividends paid and proposed £94,682,406 £45,700,173
Directors’ shareholdings (audited)
The directors had the following shareholdings in the Company.
Director
Ordinary shares
at 31 March 2023
Ordinary shares
at 31 March 2022
Cyrus Ardalan 206,000 206,000
Hugh Seaborn 40,595 –
John Cartwright
1
66,687 66,687
Patricia Dimond
2
n/a 39,520
Jan Etherden
3
n/a 77,274
Ismat Levin 14,084 14,084
Sandy Gumm
4
639,345 n/a
Nick Leslau
5
95,978,407
5
n/a
1 Includes 42,814 shares held beneficially by aconnected person
2 Includes 8,005 shares held non-beneficially by aconnected person. Retired from the
Board on 19 July 2022
3 Retired from the Board on 15 July 2022
4 Appointed to the Board on 6 July 2022
5 Includes companies wholly owned and persons closely associated (as defined by the UK
Market Abuse Regulation) with the Director
The shareholdings of the Directors are not significant and
therefore do not compromise their independence as non-
executive Directors with the exception of Nick Leslau.
NickLeslau controls an interest in 5.6% of the capital of the
Company. His interests are therefore very loosely aligned with
those of all shareholders. However, under the terms of the AIC
Code, he is not considered independent as a result of the size of
the shareholding.
The law requires the Company’s Independent Auditor to
audit certain disclosures provided in the annual report on
remuneration. Where disclosures are audited they are indicated
as such. The Independent Auditor’s opinion is given in the
Independent Auditor’s Report.
Statement
On behalf of the Board and in accordance with Part 2 of
Schedule 8 of the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations 2013,
I confirm that the above Report on Remuneration Policy and
Remuneration Implementation summarises, as applicable, for
the financial year to 31 March 2023:
a) the major decisions on Directors’ remuneration;
b) any substantial changes relating to Directors’ remuneration
made during the financial year to 31 March 2023; and
c) the context in which the changes occurred and decisions
have been taken.
Cyrus Ardalan
Chairman of the Board of Directors
6 June 2023
LXi REIT plc Annual Report 2023 75
Governance Financial Statements Additional InformationStrategic ReportOverview
The directors are responsible for preparing the annual report
and the financial statements in accordance with UK adopted
international accounting standards and applicable law
and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
are required to prepare the Group financial statements
in accordance with UK adopted international accounting
standards and have elected to prepare the Company financial
statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under Company law the
directors must not approve the financial statements unless
they are satisfied that they give atrue and fair view of the state
of affairs of the Group and Company and of the profit or loss for
the Group for that period.
In preparing these financial statements, the directors are
required to: select suitable accounting policies and then
applythem consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether they have been prepared in accordance with
UK adopted international accounting standards, subject
to any material departures disclosed and explained in the
financial statement;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business;
• prepare adirectors’ report, astrategic report and directors’
remuneration report which comply with the requirements of
the Companies Act 2006.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable them
to ensure that the financial statements comply with the
Companies Act 2006.
They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the annual
report and accounts, taken as awhole, are fair, balanced, and
understandable and provides the information necessary for
shareholders to assess the Group’s performance, business
model and strategy.
Website publication
The directors are responsible for ensuring the annual report
and the financial statements are made available on awebsite.
Financial statements are published on the Company’s website
in accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website is the
responsibility of the directors. The directors’ responsibility also
extends to the ongoing integrity of the financial statements
contained therein.
Directors’ responsibilities pursuant to DTR4
The directors confirm to the best of their knowledge:
• The financial statements have been prepared in accordance
with the applicable set of accounting standards, give atrue
and fair view of the assets, liabilities, financial position and
profit and loss of the Group.
• The annual report includes afair review of the development
and performance of the business and the financial position of
the Group and Company, together with adescription of the
principal risks and uncertainties that they face.
Fair, balanced and understandable
The Directors confirm that to the best of their knowledge the
Annual Report and Accounts taken as a whole is fair, balanced
and understandable and provides the information necessary for
Shareholders to assess the Company’s performance, business
model and strategy.
Approval
This Directors’ responsibilities statement was approved by the
Board of Directors and signed on its behalf
Cyrus Ardalan
Chairman of the Board of Directors
6 June 2023
Statement of Directors’ responsibilities
76 LXi REIT plc Annual Report 2023
Additional InformationFinancial StatementsGovernanceStrategic ReportOverview
LXi REIT plc Annual Report 2023 77
Governance Financial Statements Additional InformationStrategic ReportOverview
Opinion on the financial statements
In our opinion:
• the financial statements give atrue and fair view of
the state of the Group’s and of the Parent Company’s
affairs as at 31 March 2023 and of the Group’s loss for the
year then ended;
• the Group financial statements have been properly
prepared in accordance with UK adopted international
accounting standards;
• the Parent Company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of LXi REIT plc (the
‘Parent Company’) and its subsidiaries (the ‘Group’) for the
year ended 31 March 2023 which comprise the Consolidated
statement of comprehensive income, the Consolidated and
Company statement of financial position, the Consolidated and
Company statement of changes in equity, the Consolidated cash
flow statement and notes to the financial statements, including
a summary of significant accounting policies. The financial
reporting framework that has been applied in the preparation
of the Group financial statements is applicable law and UK
adopted international accounting standards. The financial
reporting framework that has been applied in the preparation
of the Parent Company financial statements is applicable law
and United Kingdom Accounting Standards, including Financial
Reporting Standard 101 Reduced Disclosure Framework (United
Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide abasis for our opinion. Our audit opinion is consistent
with the additional report to the audit committee.
Independence
Following the recommendation of the audit committee, we
were appointed by the Directors on 25 August 2017 to audit
the financial statements for the year ended 31 March 2018 and
subsequent financial periods. The period of total uninterrupted
engagement including retenders and reappointments is 6 years,
covering the years ended 31 March 2018 to 31 March 2023. We
remain independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. The non-audit services
prohibited by that standard were not provided to the Group or
the Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that
the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group and
the Parent Company’s ability to continue to adopt the going
concern basis of accounting included:
• Using our knowledge of the Group and its market sector
together with the current economic environment to
assess the Directors’ identification of the inherent risks
to the Group’s business and how these might impact the
Group’s ability to remain agoing concern for the going
concern period, being the period to 30 June 2024, which is
at least 12 months from when the financial statements are
authorised for issue;
• Obtaining an understanding of the Directors’ process for
assessing going concern including an understanding of the
key assumptions used;
• Obtaining the Directors’ going concern assessment:
- Assessing the Group’s forecast cash flows with reference
to budgeted and historic performance and challenging
the forecast assumptions in comparison to the current
performance of the Group;
- Agreeing the inputs into the forecasts to supporting
documentation to assess the reasonableness thereof,
using historic information and contractual agreements,
where available;
- Agreeing the Group’s available borrowing facilities,
including new financing arrangements entered into
after the balance sheet date, and the related terms and
covenants to loan agreements.
• Analysing the sensitivities applied by the Directors’ stress
testing calculations and challenging the assumptions made
using our knowledge of the business and of the current
economic climate, to assess the reasonableness of the
downside scenarios selected;
• Reviewing forecast covenant calculations to identify any
potential future covenant breaches;
• Considering the covenant compliance headroom for
sensitivity to both future changes in property valuations and
the Group’s future financial performance;
• Considering board minutes, and evidence obtained through
the audit and challenging the Directors on the identification
of any contradictory information in the forecasts and the
resultant impact to the going concern assessment; and
• Reviewing the disclosures in the financial statements
relating to going concern to check that the disclosure is
consistent with the Directors’ going concern assessment.
Independent Auditor’s report to the members
of LXi REIT plc
78 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group and the Parent Company’s ability to continue as agoing
concern for aperiod of at least twelve months from when the
financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has
applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’
statement in the financial statements about whether the
Directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
Coverage
1
100% (2022: 100%) of Group profit before tax
100% (2022: 100%) of Group revenue
100% (2022: 100%) of Group total assets
100% (2022: 100%) of Group investment property
Key audit
matters
2023 2022
KAM 1 Investment Property
Valuations
Investment Property
Valuations
KAM 2 Acquisition of Secure
Income REIT plc
–
Materiality Group financial statements as awhole
£37.0m (2022: £15.9m) based on 1% (2022: 1%) of total assets
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding
of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material
misstatement in the financial statements. We also addressed
the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors
that may have represented arisk of material misstatement.
The Group operates through one segment, investment
property, structured through a number of subsidiary special
purpose vehicle (“SPV”) companies. We identified one
significant component, in addition to the Parent Company, for
which a full scope audit was performed being the investment
property component of the Group. All audit procedures were
performed by the Group audit team. There were no non-
significant components.
Climate change
Our work on the assessment of potential impacts on
climate-related risks on the Group’s operations and financial
statements included:
• Enquiries and challenge of the Manager and the independent
valuer to understand the actions they have taken to identify
climate-related risks and their potential impacts on the
financial statements and adequately disclose climate-related
risks within the annual report;
• Our own qualitative risk assessment taking into
consideration the sector in which the Group operates and
how climate change affects this particular sector; and
• Review of the minutes of Board and Audit Committee
meetings and other papers related to climate change and
performed a risk assessment as to how the impact of the
Group’s commitment as set out in ESG section may affect
thefinancial statements and our audit.
We challenged the extent to which climate-related
considerations, including the expected cash flows from the
initiatives and commitments have been reflected, where
appropriate, in the Directors’ going concern assessment and
viability assessment.
We also assessed the consistency of disclosures included as
‘Statutory other Information’ on page 81 with the financial
statements and with our knowledge obtained from the audit.
Based on our risk assessment procedures, we did not identify
any Key Audit Matters materially impacted by climate-
related risks.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the most
significant assessed risks of material misstatement (whether
or not due to fraud) that we identified, including those which
had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit, and directing the efforts
of the engagement team. These matters were addressed in the
context of our audit of the financial statements as awhole,
and in forming our opinion thereon, and we do not provide
aseparate opinion on these matters.
LXi REIT plc Annual Report 2023 79
Governance Financial Statements Additional InformationStrategic ReportOverview
Independent Auditor’s report to the members
of LXi REIT plc
Key audit matter How the scope of our audit addressed the key audit matter
Investment property valuations
Refer to notes 2 and 3 in relation to
significant estimates and accounting policies.
Refer to Note 8 in relation to investment
property.
The valuation of Investment property
requires significant judgement and estimates
by the Directors and the independent valuer
appointed by Manager and is therefore
considered akey audit matter due to the
subjective nature of certain assumptions
inherent in each valuation.
Any input inaccuracies or unreasonable bases
used in the valuation judgements (such as in
respect of estimated rental value and yield
profile applied) could result in amaterial
misstatement of the financial statements.
There is also arisk of fraud in relation to
thevaluation of the property portfolio
wherethe Directors may influence the
significant judgements and estimates in
respect of property valuations in order
to achieve property valuation and other
performance targets.
Additionally, properties under construction
involve license fee income receivable from
the developer during the construction phase.
Accounting for such assets is typically more
complex than for standing assets.
The valuation of investment properties was
therefore considered to be a key audit matter.
Experience of valuer and relevance of its work
• We obtained the valuation report prepared by the independent valuer and discussed the basis of the
valuations with them. We determined whether the basis of the valuations was in accordance with the
requirements of accounting standards.
• We assessed the external valuer’s qualifications, independence and basis of valuation.
• We obtained acopy of the instructions provided to the independent valuer and reviewed for any limitations
in scope or for evidence of management bias.
Data provided to the valuer
• We validated the underlying data provided to the valuer by the Manager. This data included inputs such as
current rent and lease term, for which we agreed all to the executed lease agreements as part of our audit work.
Assumptions and estimates used by the valuer
• With the assistance of internal RICS-qualified experts we developed yield expectations on each property
using available independent industry data, reports and comparable transactions in the market around the
period end. They also attended the audit meetings with the Group’s valuers to assist us in assessing that
explanations provided were appropriate and in line with market knowledge.
• We discussed the assumptions used and the valuation movement in the period with both the Manager
and the independent valuer. Where the valuation was outside of our expected range we challenged the
independent valuer on specific assumptions and reasoning for the yields applied and corroborated their
explanations where relevant, including agreeing to third party documentation. We also challenged the
valuer regarding their views on the impact of wider macroeconomic events on the valuation of these assets.
Further, we challenged the appropriateness of the discount rates applied to the valuations with the valuer
and where possible obtained evidence of comparable market transactions through independent sources.
• For properties under construction we assessed the project costs and progress of development, by agreeing
funding drawdowns during the year to third part documentation, and verified the forecast costs to complete
included in the valuations to third party documentation.
Accounting for assets under construction
• We examined all forward funding agreements entered into during the year for assets under construction
and determined whether the accounting treatment of the asset recognition and the license fee income was
appropriate under accounting standards.
Key observations
Based on our work we have not noted any material instance which may indicate that the assumptions adopted
by the Directors in the valuation of investment property were unreasonable or that the methodology applied
was inappropriate.
Acquisition of Secure Income
REITplc
Refer to Note 2 and 3 in relation to significant
estimates and accounting policies.
Refer to Note 27 in relation to the acquisition
of Secure Income REIT plc.
During the year, the Parent Company
acquired the entire issued share capital of the
company formerly known as Secure Income
REIT plc (“SIR”). The consideration for the
acquisition was based on apre-agreed share-
for-share ratio with apartial cash alternative.
The accounting entries and judgment
regarding the accounting treatment for
the acquisition, together with the related
disclosures is considered a key audit
matter given the significant and subjective
judgments made by the Directors as to
whether the acquisition is accounted for as a
business combination or an asset acquisition
and in the determination of any fair value
adjustments to the acquired assets and
liabilities.
An incorrect judgment with regards to
the accounting treatment, or incorrect
estimate as to the fair values of the assets or
liabilities acquired, could result in a material
misstatement of the financial statements.
• We obtained the Manager’s formal assessment of the accounting for the acquisition which included the
basis for treating the acquisition as an asset acquisition.
• We challenged the Manager on various specific points of interpretation within the accounting requirements
of IFRS 3 Business Combinations relating to the treatment of the acquisition, including the following:
- Whether the conditions of the optional concentration test under IFRS 3 Business Combinations applied to
the acquisition or not.
- Having concluded that the optional concentration test did not apply to the acquisition, whether the
acquisition included substantive processes such that outputs could be generated from the asset and
therefore a business had been acquired.
• We verified the consideration paid to the relevant acquisition documentation, including but not limited to,
the acquisition facility agreement, the share and purchase agreement and other supporting documentation.
• We obtained the opening balance sheet for SIR and we assessed the accuracy of any fair value adjustments,
noting that as a share-based payment, the consideration was measured with reference to the fair value of
the acquired assets and liabilities. Our procedures included:
- We obtained valuations from the Group’s independent experts in respect of the acquired Investment
property, derivative instruments and fixed-rate bank borrowings.
- We set expectations for the investment property valuations based on market movements and challenged
the Manager and the Valuer where there were differences.
- With the use of our internal valuation experts we assessed the adequacy of the fair value adjustments
made in respect of the derivative instruments and fixed-rate bank borrowings.
• For all other acquired assets and liabilities, we challenged the Manager’s assessment that the carrying
value reflected the fair value with reference to the requirements of the applicable accounting standard and
agreed a sample where relevant to supporting documentation to confirm the carrying values.
• We considered the adequacy of the disclosures made by the Directors in relation to the acquisition with
regards to the requirements of the applicable accounting standard. This included the disclosures relating
tothe significant judgments in respect of the treatment of the acquisition as an asset acquisition as opposed
to a business combination.
Key observations
Based on our work we have not noted any material instance which may indicate that the judgments made
bythe Directors in the accounting treatment of the acquisition were unreasonable or inappropriate.
80 LXi REIT plc Annual Report 2023
Governance Financial Statements Additional InformationStrategic ReportOverview
Our application of materiality
We apply the concept of materiality both in planning
and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by
which misstatements, including omissions, could influence the
economic decisions of reasonable users that are taken on the
basis of the financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use alower
materiality level, performance materiality, to determine the
extent of testing needed. Importantly, misstatements below
these levels will not necessarily be evaluated as immaterial as
we also take account of the nature of identified misstatements,
and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as awhole.
Based on our professional judgement, we determined
materiality for the financial statements as awhole and
performance materiality as follows:
Group
financialstatements
Parent company
financialstatements
2023
£m
2022
£m
2023
£m
2022
£m
Materiality 37.0 15.9 18.5 10.1
Basis for determining
materiality
Materiality for the Group and Parent Company’s
financial statements was set at 1% (2022: 1%) of
total assets.
Rationale for the
benchmark applied
We determined that total assets would be the
most appropriate basis for determining overall
materiality as we consider it to be the principal
consideration for the users of the financial
statements in assessing the financial performance
of the Group and the Parent Company.
Performance
materiality
24.1 10.3 12.0 6.6
Basis for determining
performance
materiality
65% (2022: 65%) of materiality. We determined
that the same measure as the Group was
appropriate for the Parent Company.
Rationale for the
percentage applied
forperformance
materiality
We determined that 65% of materiality would be
appropriate based on our risk assessment,
together with our assessment of the Group’s and
Parent Company’s overall control environment,
the low number of components, the low value of
brought forward adjustments impacting the
current year and low value of expected
misstatements, based on past experience.
Specific materiality
We also determined that for the measurement of other account
balances and classes of transactions not related to investment
properties, amisstatement of less than materiality for the
financial statements as awhole, specific materiality, could
influence the economic decisions of users. As aresult, we
determined specific materiality for these items to be £6.0m
(2022: £2.1m). This is based on 5% (2022: 5%) of European
Public Real Estate Association (“EPRA”) earnings. EPRA
earnings excludes the impact of the net surplus or deficit on
the revaluation of, and profit or loss on disposal of, investment
properties and financial instruments. We further applied
aperformance materiality level of 65% (2022: 65%) of specific
materiality to ensure that the risk of errors exceeding specific
materiality was appropriately mitigated.
Component materiality
For the purposes of our Group audit opinion, we set materiality
for the significant component of the Group, apart from the
Parent Company whose materiality is set out above, on the
same basis as Group materiality, being 1% (2022: 1%) of the
total assets of the component. Component materiality was set
at £33.3m (2022: ranged from £2m to £7.3m). In the audit of
the component, we further applied aperformance materiality
level of 65% (2022: 65%) of the component materiality to our
testing to ensure that the risk of errors exceeding component
materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report
to them all individual audit differences in excess of £740,000
(2022: £317,000) for items audited to financial statement
materiality, and £120,000 (2022: £41,000) for items audited to
specific materiality. We also agreed to report differences below
these thresholds that, in our view, warranted reporting on
qualitative grounds.
Other information
The directors are responsible for the other information.
Theother information comprises the information included in
the Annual Report other than the financial statements and
our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to amaterial
misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is
amaterial misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
LXi REIT plc Annual Report 2023 81
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Independent Auditor’s report to the members
of LXi REIT plc
Corporate governance statement
The Listing Rules require us to review the Directors’ statement
in relation to going concern, longer-term viability and that part
of the Corporate Governance Statement relating to the parent
company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements or our knowledge obtained
during the audit.
Going concern and longer-term viability
• The Directors’ statement with regards to the
appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set
outon page 52; and
• The Directors’ explanation as to their assessment of the
Group’s prospects, the period this assessment covers and
why the period is appropriate set out on pages 52 to 54.
Other Code provisions
• Directors’ statement on fair, balanced and understandable
set out on page 76;
• Board’s confirmation that it has carried out arobust
assessment of the emerging and principal risks set out on
pages 48 to 51;
• The section of the annual report that describes the review
of effectiveness of risk management and internal control
systems set out on page 65; and
• The section describing the work of the audit committee set
out on pages 67 to 69.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by
the Companies Act 2006 and ISAs (UK) to report on certain
opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the
course of the audit:
• the information given in the Strategic report and the
Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
• the Strategic report and the Directors’ report have been
prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the
Group and Parent Company and its environment obtained
in the course of the audit, we have not identified material
misstatements in the strategic report or the Directors’ report.
Directors’ remuneration
In our opinion, the part of the Directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the Parent Company financial statements and the part of
the Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified
bylaw are not made; or
• we have not received all the information and explanations
we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’
responsibilities, the Directors are responsible for the
preparation of the financial statements and for being satisfied
that they give atrue and fair view, and for such internal
control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent Company’s
ability to continue as agoing concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financialstatements
Our objectives are to obtain reasonable assurance about
whether the financial statements as awhole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is ahigh level of assurance, but is not aguarantee
that an audit conducted in accordance with ISAs (UK) will
always detect amaterial misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
82 LXi REIT plc Annual Report 2023
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Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
Based on:
• Our understanding of the Group and the industry in which
it operates;
• Discussion with the Manager and those charged with
governance; and
• Obtaining and understanding the Group’s policies and
procedures regarding compliance with laws and regulations,
we considered the significant laws and regulations to be the
Companies Act 2006, the UK Listing Rules and the UK Real
Estate Investment Trust (“REIT”) regime.
The Group is also subject to laws and regulations where the
consequence of non-compliance could have a material effect
on the amount or disclosures in the financial statements, for
example through the imposition of fines or litigations. We
identified such laws and regulations to be UK VAT regulations.
Our procedures in respect of the above included:
• Review of Board and Committee meeting minutes for any
instances of non-compliance with laws and regulations;
• Review of a report from the Group’s external tax adviser,
detailing the actions that the Group has undertaken
to ensure compliance. With the assistance of our
internal tax experts, this paper was reviewed, and the
assumptions challenged;
• Review of financial statement disclosures and agreeing to
supporting documentation; and
• Review of legal expenditure accounts to understand the
nature of expenditure incurred.
Fraud
We assessed the susceptibility of the financial statements to
material misstatement, including fraud. Our risk assessment
procedures included:
• Enquiry with the Manager and those charged with
governance regarding any known or suspected
instances of fraud;
• Obtaining an understanding of the Group’s policies and
procedures relating to:
- Detecting and responding to the risks of fraud; and
- Internal controls established to mitigate risks
related to fraud.
• Review of Board and Committee meeting minutes for any
known or suspected instances of fraud;
• Discussion amongst the engagement team as to how and
where fraud might occur in the financial statements; and
• Performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud.
Based on our risk assessment, we considered the areas most
susceptible to fraud to be the assessment of lease term lengths
that any incentives are recognised over, revenue recognition
(completeness and accuracy of lease incentives), investment
property valuations and management override of controls.
Our procedures in respect of the above included:
• Testing a sample of journal entries throughout the year,
which met a defined risk criteria, by agreeing to supporting
documentation;
• We agreed all bank and loan balances to direct bank
confirmations and agreements;
• We also addressed the risk of management override of
internal controls by evaluating whether there was evidence
of bias by the Manager and the Directors that represented
a risk of material misstatement due to fraud. This included
evaluating any management bias within the valuation of
investment property, as mentioned under the key audit
matters subheading;
• To address the fraud risk in relation to the assessment of
lease term lengths that any incentives are recognised over,
we assessed the Directors’ judgements of lease terms for
any evidence of bias.
• To address the fraud risk in relation to the completeness
of lease incentives, we obtained all new or amended lease
agreements and ensured that any lease incentives were
correctly recorded. For all new, amended and existing leases,
we set expectations for the rental income to be received
under the lease agreement, investigating any variances. For a
sample of new, amended and existing leases, we verified the
cash receipts and payee details as per the lease agreement
to bank statements, investigating any variances.
• To address the fraud risk in relation to the accuracy of
lease incentives, we recalculated and traced to source
documentation the details of all lease incentives.
LXi REIT plc Annual Report 2023 83
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We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members
who were all deemed to have appropriate competence
and capabilities and remained alert to any indications
of fraud or non-compliance with laws and regulations
throughout the audit.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising
that the risk of not detecting amaterial misstatement due
to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment
by, for example, forgery, misrepresentations or through
collusion. There are inherent limitations in the audit procedures
performed and the further removed non-compliance with
laws and regulations is from the events and transactions
reflected in the financial statements, the less likely we are to
become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members,
as abody, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Parent Company’s members those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other
than the Parent Company and the Parent Company’s members
as abody, for our audit work, for this report, or for the opinions
we have formed.
Christopher Young (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
6 June 2023
BDO LLP is alimited liability partnership registered in England
and Wales (with registered number OC305127).
Independent Auditor’s report to the members
of LXi REIT plc
84 LXi REIT plc Annual Report 2023
Financial Statements
Financial Statements
Consolidated statement of comprehensive income 86
Consolidated statement of financial position 87
Consolidated statement of changes in equity 88
Consolidated cash flow statement 89
Notes to the consolidated financial statements 90
Company statement of financial position 121
Company statement of changes in equity 122
Notes to the Company financial statements 123
Financial Statements
Governance Additional InformationStrategic ReportOverview
LXi REIT plc Annual Report 2023 85
Strategic Report GovernanceOverview Financial Statements Additional Information
Note
Year ended
31 March 2023
£m
Year ended
31 March 2022
£m
Rental income 4 203.5 58.5
Property expenses (5.3 ) –
Gross profit 198.2 58.5
Administrative and other expenses 5 (18.8 ) (9.3 )
Operating profit before movements in investment property
andfinancialinstruments 179.4 49.2
Change in fair value of investment property 8 (406.7 ) 117.7
Change in fair value of financial instruments 16 22.2 1.2
Loss on disposal of investment property 8 (2.8 ) –
Operating (loss)/profit (207.9 ) 168.1
Loss on disposal of financial instruments (4.6 ) –
Loss on early extinguishment of debt 6 (20.6 ) –
Finance costs 6 (54.0 ) (6.8 )
(Loss)/profit before tax (287.1 ) 161.3
Taxation 7 (1.0 ) 0.7
(Loss)/profit for the year (288.1 ) 162.0
Other comprehensive income
Currency translation gain 1.3 –
Total comprehensive (loss)/income attributable to shareholders (286.8 ) 162.0
(Loss)/earnings per share – basic and diluted 25 (19.2 22.8
The notes on pages 90 to 120 form part of the consolidated financial statements.
Consolidated statement of comprehensive income
86 LXi REIT plc Annual Report 2023
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Note
31 March 2023
£m
31 March 2022
£m
Non-current assets
Investment property 8 3,569.6 1,480.1
Fixed assets 0.2 –
Derivative financial instruments 16 29.3 –
Total non-current assets 3,599.1 1,480.1
Current assets
Trade and other receivables 11 16.8 19.4
Assets held for sale 9 32.3 19.0
Deferred acquisition costs 2.6 0.7
Derivative financial instruments 16 3.1 1.2
Cash and cash equivalents 12 74.4 72.5
Total current assets 129.2 112.8
Total assets 3,728.3 1,592.9
Current liabilities
Trade and other payables 13 82.6 38.6
Bank borrowings 14 508.7 –
Total current liabilities 591.3 38.6
Non-current liabilities
Bank borrowings 14 729.8 240.0
Leasehold liabilities 15 43.7 12.5
Other financial liabilities 13 254.7 –
Other payables 0.7 1.1
Total non-current liabilities 1,028.9 253.6
Total liabilities 1,620.2 292.2
Net assets 2,108.1 1,300.7
Equity
Share capital 17 17.1 9.1
Share premium reserve 17 2,120.8 940.0
Foreign exchange reserve 1.3 –
Capital reduction reserve – 21.0
Retained earnings (31.1 ) 330.6
Total equity 2,108.1 1,300.7
Net asset value per share – basic and diluted 26 123.0 p 142.7 p
EPRA NTA per share 26 121.1 p 142.6 p
The consolidated financial statements were approved and authorised for issue by the Board on 6 June 2023 and signed on
its behalf by:
Cyrus Ardalan
Chairman
The notes on pages 90 to 120 form part of the consolidated financial statements.
Consolidated statement of financial position
Company number: 10535081
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Year ended 31 March 2023 Note
Share
capital
£m
Share
premium
reserve
£m
Foreign
exchange
reserve
£m
Capital
reduction
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 April 2022 9.1 940.0 – 21.0 330.6 1,300.7
Profit and total comprehensive
income attributable to shareholders – – – (288.1 ) (288.1 )
Exchange reserve – – 1.3 – – 1.3
Transactions with owners
Issue of ordinary shares intheyear 17 8.0 1,180.8 – – – 1,188.8
Dividends paid in the year 18 – – – (21.0 ) (73.6 ) (94.6 )
Balance at 31 March 2023 17.1 2,120.8 1.3 – (31.1 ) 2,108.1
Reserves are defined in Note 17.
Year ended 31 March 2022 Note
Share
capital
£m
Share
premium
reserve
£m
Capital
reduction
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 April 2021 6.2 544.5 62.1 168.6 781.4
Profit and total comprehensive
incomeattributable to shareholders – – – 162.0 162.0
Transactions with owners
Issue of ordinary shares intheyear 17 2.9 402.6 – – 405.5
Share issue costs 18 – (7.1 ) – – (7.1 )
Dividends paid in the year 18 – – (41.1 ) – (41.1 )
Balance at 31 March 2022 9.1 940.0 21.0 330.6 1,300.7
The notes on pages 90 to 120 form part of the consolidated financial statements.
Consolidated statement of changes in equity
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Note
Year ended
31 March 2023
£m
Year ended
31 March 2022
£m
Cash flows from operating activities
(Loss)/profit before tax
(287.1 ) 161.3
Adjustments for:
Finance costs
6 54.0 6.8
Make-whole costs on settlement of debt facility 6 20.6 –
Change in fair value of investment property 8 406.7 (117.7 )
Loss on disposal of investment property 8 2.8 –
Loss on disposal of derivative 4.6 –
Change in fair value of derivative (22.2 ) (1.2 )
Accretion of tenant lease incentives 4 (37.8 ) (9.9 )
Tax paid (0.1 ) –
Operating results before working capital changes 141.5 39.3
Decrease/(increase) in trade and other receivables 4.3 (3.2 )
Increase in trade and other payables 23.9 15.3
Net cash flow generated from operating activities 169.7 51.4
Cash flows from investing activities
Purchase of investment properties 8 (80.0 ) (425.4 )
Cash alternative paid to SIR plc shareholders 27 (392.3 ) –
Interest received 0.4 –
Proceeds from sale of investment property 8 29.5 8.3
Net cash flow used in investing activities (442.4 ) (417.1 )
Cash flows from financing activities
Proceeds from shares issued in the year
Share issue costs paid – (7.2 )
Dividends paid (89.0 ) (41.1 )
Interest paid (40.4 ) (6.6 )
Payments on other financial liabilities (4.5 ) –
Interest received on in-the-money financial instruments 2.2 –
Purchase of interest rate cap 16 (26.5 ) (0.1 )
Proceeds from recognition of income strip 15 257.0 –
Proceeds from close out of interest rate cap 16 23.1 –
Make-whole costs on settlement of debt 6 (20.6 ) –
Drawdown of borrowings 14 499.0 239.7
Repayment of borrowings 14 (322.6 ) (186.0 )
Loan arrangement fees paid (3.1 ) (1.4 )
Net cash flow generated from financing activities 274.6 351.1
Net (decrease)/increase in cash and cash equivalents 1.9 (14.6 )
Cash and cash equivalents at the beginning of the year 72.5 87.1
Cash and cash equivalents at the end of the year 12 74.4 72.5
The notes on pages 90 to 120 form part of the consolidated financial statements.
Consolidated cash flow statement
LXi REIT plc Annual Report 2023 89
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Notes to the consolidated financial statements
90 LXi REIT plc Annual Report 2023
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Notes to the consolidated financial statements (continued)
1. Basis of preparation (continued)
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3. Summary of significant accounting policies
Notes to the consolidated financial statements (continued)
94 LXi REIT plc Annual Report 2023
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Notes to the consolidated financial statements (continued)
3. Summary of significant accounting policies (continued)
96 LXi REIT plc Annual Report 2023
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Notes to the consolidated financial statements (continued)
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LXi REIT plc Annual Report 2023 99
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Notes to the consolidated financial statements (continued)
8. Investment property (continued)
100 LXi REIT plc Annual Report 2023
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LXi REIT plc Annual Report 2023 101
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Notes to the consolidated financial statements (continued)
8. Investment property (continued)
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LXi REIT plc Annual Report 2023 103
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Notes to the consolidated financial statements (continued)
11. Trade and other receivables (continued)
104 LXi REIT plc Annual Report 2023
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LXi REIT plc Annual Report 2023 105
Strategic Report GovernanceOverview Financial Statements Additional Information
Notes to the consolidated financial statements (continued)
14. Bank borrowings (continued)
106 LXi REIT plc Annual Report 2023
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LXi REIT plc Annual Report 2023 107
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Notes to the consolidated financial statements (continued)
108 LXi REIT plc Annual Report 2023
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LXi REIT plc Annual Report 2023 109
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Notes to the consolidated financial statements (continued)
110 LXi REIT plc Annual Report 2023
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LXi REIT plc Annual Report 2023 111
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Notes to the consolidated financial statements (continued)
20. Segmental information (continued)
112 LXi REIT plc Annual Report 2023
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LXi REIT plc Annual Report 2023 113
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Notes to the consolidated financial statements (continued)
22. Consolidated entities (continued)
114 LXi REIT plc Annual Report 2023
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LXi REIT plc Annual Report 2023 115
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Notes to the consolidated financial statements (continued)
116 LXi REIT plc Annual Report 2023
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LXi REIT plc Annual Report 2023 117
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Notes to the consolidated financial statements (continued)
118 LXi REIT plc Annual Report 2023
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LXi REIT plc Annual Report 2023 119
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Notes to the consolidated financial statements (continued)
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Note
31 March 2023
£m
31 March 2022
£m
Non-current assets
Investment in subsidiaries 4 2,177.3 597.7
Trade and other receivables 455.2 –
Investment property 5 5.1 65.0
Total non-current assets 2,637.6 662.7
Current assets
Trade and other receivables 6 0.9 397.6
Derivative financial instruments 1.1 –
Cash and cash equivalents 7 0.6 13.5
Total current assets 2.6 411.1
Total assets 2,640.2 1,073.8
Current liabilities
Trade and other payables 8 230.0 111.1
Borrowings 9 384.5 –
Total current liabilities 614.5 111.1
Total liabilities 614.5 111.1
Net assets 2,025.7 962.7
Equity
Share capital 11 17.1 9.1
Share premium reserve 12 2,120.8 940.0
Capital reduction reserve – 21.0
Retained earnings (112.2) (7.4)
Total equity 2,025.7 962.7
Net asset value per share – basic and diluted 13 118.2p 106.0p
The Company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented
its own profit and loss account in these financial statements. The loss and total comprehensive loss attributable toshareholders of
the parent Company for the year amounted to £31.2m (31 March 2022: £9.5m loss).
The Company financial statements were approved and authorised for issue by the Board on 6 June 2023 and signed on
its behalf by:
Cyrus Ardalan
Chairman
The notes on pages 123 to 127 form part of the Company financial statements.
Company statement of financial position
Company number: 10535081
LXi REIT plc Annual Report 2023 121
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Year ended 31 March 2023 Note
Share
capital
£m
Share
premium
reserve
£m
Capital
reduction
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 April 2022 9.1 940.0 21.0 (7.4) 962.7
Loss and total
comprehensiveincome
attributable to shareholders – – – (31.2) (31.2)
Transactions with owners
Issue of ordinary shares
intheyear 11, 12 8.0 1,180.8 – – 1,188.8
Dividends paid in the year 10 – – (21.0) (73.6) (94.6)
Balance at 31 March 2023 17.1 2,120.8 – (112.2) 2,025.7
Year ended 31 March 2022 Note
Share
capital
£m
Share
premium
reserve
£m
Capital
reduction
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 April 2021 6.2 544.5 62.1 2.1 614.9
Loss and total
comprehensiveincome
attributable to shareholders – – – (9.5) (9.5)
Transactions with owners
Issue of ordinary shares
intheyear 11, 12 2.9 402.6 – – 405.5
Share issue costs 12 – (7.1) – – (7.1)
Dividends paid in the year 10 – – (41.1) – (41.1)
Balance at 31 March 2022 9.1 940.0 21.0 (7.4) 962.7
The notes on pages 123 to 127 form part of the Company financial statements.
Company statement of changes in equity
122 LXi REIT plc Annual Report 2023
Strategic Report GovernanceOverview Financial Statements Additional Information
1. Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 100 Application of Financial
Reporting Requirements (“FRS 100”) and Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). The
Company is registered in England and Wales under company registration number 10535081.
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of disclosure exemptions conferred by FRS 101 and
therefore these financial statements do not include:
• Certain disclosures regarding the Company’s capital;
• A statement of cash flows;
• The effect of future accounting standards not yet adopted;
• The disclosure of the remuneration of key management personnel; and
• Disclosure of related party transactions with other wholly owned members of the Company.
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent disclosures are
included in the Group Financial Statements. These financial statements do not include certain disclosures in respect of:
• Financial instruments; and
• Fair value measurement other than certain disclosures required as aresult of recording financial instruments at fair value.
The principal accounting policies applied in the preparation of the financial statements are set out below.
The Company’s financial statements are presented in Sterling, which is also the Company’s functional currency.
Standards effective from 1 April 2022
See Note 1 of the Consolidated Financial Statements.
2. Significant accounting judgments, estimate and assumptions
In the application of the Company’s accounting policies, which are described in Note 3, the Board is required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions that have asignificant risk of causing amaterial adjustment to the carrying amounts of
assets and liabilities within the next financial year are outlined below:
Estimates:
Valuation of investment property
The Company’s estimates in relation to its investment property are consistent with the Group for which details are given in the
Note 2 to the consolidated financial statements.
Judgments:
Classification of lease arrangements – the Company as lessor
The Company’s judgments in relation to its classification of lease arrangements are consistent with the Group for which details are
given in the Note 2 to the consolidated financial statements.
Lease term
Rental income is recognised on astraight-line basis over the expected lease term. Ajudgement has to be made by the Directors
as to the expected term of each lease. The judgement involves determining whether extension option clauses on certain leases
will be exercised. This judgement impacts the length of time over which lease incentives are recognised. The key element of this
judgement is whether the Directors can be “reasonably certain” that any breaks in place to extend the lease term will be exercised
at the expiry of the current lease. The Directors concluded that it was impossible to say with reasonable certainty that an option
will be exercised. The Directors concluded that lease terms should be restricted to the initial length of the lease, or to the break
date, except where reversionary lease have already been executed or where options to extend have already been exercised.
Notes to the Company financial statements
LXi REIT plc Annual Report 2023 123
Strategic Report GovernanceOverview Financial Statements Additional Information
3. Principal accounting policies
The principal accounting policies adopted in the preparation of the Company financial statements are consistent with the Group
which are described in Note 3 to the consolidated financial statements. Policies adopted in the preparation of the Company’s
financial statements that are not included in the consolidated financial statements are given below:
Investment in subsidiaries
Investment in subsidiaries is included in the statement of financial position at cost less provision for impairment.
Loans to subsidiaries
Impairment provisions for receivables from and loans to subsidiaries are recognised based on aforward-looking expected credit
loss model. The methodology used to determine the amount of provision is based on whether there has been asignificant increase
in credit risk since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income
are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with
interest income on anet basis are recognised.
4. Investment in subsidiaries
31 March 2023
£m
31 March 2022
£m
At beginning of the year 597.7 597.7
Additions in the year 1,579.6 –
At end of the year 2,177.3 597.7
A list of the Company’s subsidiary undertakings is included in Note 22 to the consolidated financial statements.
5. Investment property
Year ended 31 March 2023
Freehold
£m
Balance at 1 April 2022 65.0
Investment property disposals (58.8)
Change in fair value (1.1)
Balance at 31 March 2023 5.1
Year ended 31 March 2022
Freehold
£m
Balance at 1 April 2021 4.5
Investment property additions 61.9
Change in fair value (1.4)
Balance at 31 March 2022 65.0
Detailed information about the valuation of investment property is included in Note 8 to the consolidated financial statements.
Notes to the Company financial statements (continued)
124 LXi REIT plc Annual Report 2023
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6. Trade and other receivables
31 March 2023
£m
31 March 2022
£m
Amounts due from subsidiaries – 396.2
Recoverable VAT 0.8 0.5
Rent receivable – 0.8
Prepayments and other receivables 0.1 0.1
Total current trade and other receivables 0.9 397.6
Amounts due from subsidiaries 455.2 –
Total non current trade and other receivables 455.2 –
Following the merger with SIR plc the company undertook a detailed review of the intercompany balances and determined that
they no longer expect the balances to be settled within one year. As such, following the change in intentions, the amounts due
from subsidiaries have been reclassified to non current assets.
7. Cash and cash equivalents
31 March 2023
£m
31 March 2022
£m
Cash at bank 0.1 3.0
Cash held by lawyers 0.5 10.5
Total cash at bank 0.6 13.5
8. Trade and other payables
31 March 2023
£m
31 March 2022
£m
Amounts due to subsidiary undertakings 217.3 109.1
Accruals and deferred income 5.8 1.1
Trade creditors 1.2 –
Other creditors 5.7 0.9
230.0 111.1
All amounts are due for payment within one year.
LXi REIT plc Annual Report 2023 125
Strategic Report GovernanceOverview Financial Statements Additional Information
9. Bank borrowings
Year ended 31 March 2023
Drawn
£m
Undrawn
£m
Total
£m
At beginning of the year – – –
New facilities 385.0 – 385.0
At end of the year 385.0 – 385.0
Less: unamortised loan arrangement fees (0.5) – (0.5)
384.5 – 384.5
Year ended 31 March 2022
Drawn
£m
Undrawn
£m
Total
£m
At beginning of the year – – –
New facilities – – –
Drawdowns – – –
Repayments – – –
At end of the year – – –
Less: unamortised loan arrangement fees – – –
– – –
Maturity of bank borrowings
31 March 2023
£m
31 March 2022
£m
Repayable within 1 year 385.0 –
Repayable between 1 and 2 years – –
Repayable between 2 and 5 years – –
Repayable after 5 years – –
385.0 –
The Company’s borrowings comprise the following:
Acquisition facility
• In May 2022 the Company entered into a £385.0m unsecured interest only loan with Barclays Bank Plc and HSBC Plc in order
to fund the Merger. Interest on the loan increases by 25bps every quarter, from a starting point of 1.5%. The rate payable as
at 31 March 2023 1.75%. The loan is repayable in May 2024 assuming two six-month extension options are exercised. This was
repaid post year-end.
The Company has remained compliant with the covenants throughout the period up to the date of this report.
10. Dividends
31 March 2023
£m
31 March 2022
£m
Dividends paid 94.6 41.1
Detailed information about the dividends paid by the Company is included in Note 18 to the consolidated financial statements.
After the year end the Directors became aware of a technical issue in respect of certain dividends paid since the Merger. Further
detail is given in the Directors’ report on page 56.
Notes to the Company financial statements (continued)
126 LXi REIT plc Annual Report 2023
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11. Share capital
31 March 2023
£m
31 March 2022
£m
Share capital 17.1 9.1
Detailed information about the share capital of the Company is included in Note 17 to the consolidated financial statements.
12. Share premium reserve
31 March 2023
£m
31 March 2022
£m
Share premium 2,120.8 940.0
Detailed information about the share premium of the Company is included in Note 17 to the consolidated financial statements.
13. Net asset value per share
Net Asset Value (“NAV”) per share is calculated by dividing net assets in the company statement of financial position attributable
to ordinary equity holders of the parent by the number of ordinary shares outstanding at the end of the period. There are no
dilutive equity instruments outstanding.
31 March 2023
£m
31 March 2022
£m
NAV 2,025.7 962.7
Number of ordinary shares (million) 1,714.5 911.6
NAV per share 118.2p 105.6p
14. Related party transactions
The Company has taken advantage of the exemption not to disclose transactions with other members of the Group as the
Company financial statements are presented together with the consolidated financial statements.
Note 21 to the consolidated financial statements includes details of other related party transactions undertaken by the Company
and its subsidiaries.
15. Guarantees
The Company has given afull guarantee on some of the Group’s loan facilities to the lenders.
16. Ultimate controlling party
There is no ultimate controlling party of the Company.
17. Post balance sheet events
Since the year end the Company has received dividends totalling £370m from its subsidiaries.
LXi REIT plc Annual Report 2023 127
Additional InformationFinancial StatementsGovernanceStrategic ReportOverview
Additional Information
Notes to the EPRA and alternative performance measures 129
Glossary 132
Company information 133
Additional Information
128 LXi REIT plc Annual Report 2023
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The Group considered EPRA NTA to be the most relevant NAV measure for the Group and we are now reporting this as our primary
NAV measure, replacing our previously reported EPRA NAV and EPRA NAV per share metrics. EPRA NTA excludes the cumulative
fair value adjustments for debt-related derivatives which are unlikely to be realised.
As at 31 March 2023
EPRA NTA
£m
EPRA NRV
£m
EPRA NDV
£m
Net asset value 2,108.1 2,108.1 2,108.1
Mark-to-market adjustments of derivatives (32.4) (32.4) –
Fair value of debt
1
– – (54.5)
Real estate transfer tax – 176.3 –
At 31 March 2023 2,075.7 2,252.0 2,053.6
Number of ordinary shares (million) 1,714.5p 1,714.5p 1,714.5p
Per share 121.1p 131.4p 119.8p
As at 31 March 2022
EPRA NTA
£m
EPRA NRV
£m
EPRA NDV
£m
Net asset value 1,300.7 1,300.7 1,300.7
Mark-to-market adjustments of derivatives (1.2) (1.2) –
Fair value of debt – – 8.8
Real estate transfer tax – 101.5 –
At 31 March 2022 1,299.5 1,401.0 1,309.5
Number of ordinary shares (million) 911.6p 911.6p 911.6p
Per share 142.6p 153.7p 143.7p
Notes to the EPRA and alternative performance measures
(unaudited)
1 Difference between interest bearing loans included in the EPRA net assets at amortised cost, and the fair value of interest bearing loans
2 E.g. Step rents and expiry of rent free periods
LXi REIT plc Annual Report 2023 129
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EPRA NIY and EPRA ‘Topped Up’ NIY
31 March 2023
£m
31 March 2022
£m
Investment property – wholly owned 3,356.3 1,544.4
Less: development properties (85.7) (123.6)
Completed property portfolio 3,270.6 1,420.8
Allowance for estimated purchasers’ costs 222.4 96.5
Gross up completed property portfolio valuation (B) 3,493.0 1,517.3
Annualised passing rental income 201.9 74.5
Less: contracted rental income in respect of development properties (4.8) (5.6)
Property outgoings – –
Annualised net rents (A) 197.1 68.9
Contractual increases for lease incentives
2
129.8 31.9
Topped up annualised net rents (C) 326.9 100.8
EPRA NIY (A/B) 5.6% 4.5%
EPRA Topped Up NIY (C/B) 9.4% 6.6%
EPRA Vacancy Rate
31 March 2023
£m
31 March 2022
£m
Annualised estimated rental value of vacant premises – –
Portfolio estimated rental value
3
197.1 68.9
EPRA Vacancy Rate 0% 0%
EPRA Cost Ratio
Year ended
31 March 2023
£m
Year ended
31 March 2022
£m
Property operating costs – –
Vacant property costs – –
Administration expenses
4
18.8 9.3
Total costs (both including and excluding vacant property costs
5
) 18.8 9.3
Total gross rental income 198.2 58.5
Total EPRA cost ratio (including and excluding vacant property costs) 9.5% 15.9%
3 Excludes contracted rents receivable on development properties
4 The Group does not have apolicy of capitalising overheads and all administrative expenses are recognised in the P&L in the period to which they relate
5 The Group has no vacant property costs
Notes to the EPRA and alternative performance measures (unaudited) (continued)
130 LXi REIT plc Annual Report 2023
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EPRA LTV
Year ended
31 March 2023
£m
Year ended
31 March 2022
£m
Borrowings from financial institutions 1,250.0 246.0
Net payables 53.7 20.3
Exclude cash (74.4) (72.5)
Net debt (a) 1,229.3 193.8
Built investment property at fair value 3,356.3 1,544.4
Fair value of properties under development 30.1 –
Net receivables – –
Total property value (b) 3,386.4 1,544.4
LTV (a/b) 36% 13%
Total NAV return
Year ended
31 March 2023
£m
Year ended
31 March 2022
£m
EPRA NTA per share at beginning of the period 142.6 125.7
EPRA NTA per share at end of the period 121.1 142.6
Change in EPRA NTA per share in the period (21.5) 16.9
Dividend per share paid in the period 6.3 6.0
Total of change in EPRA NTA and dividend per share (15.2) 22.9
Total NAV return (10.7)% 18.2%
LXi REIT plc Annual Report 2023 131
Strategic Report GovernanceOverview Financial Statements Additional Information
Average acquisition net initial yield The annualised rents at the date of acquisition of the entire portfolio, net of costs,
expressed as apercentage of the acquisition price paid for the Group’s investment
property, after adding purchase costs paid
Average debt maturity The remaining period to maturity of each of the Group’s debt facilities, multiplied by the
respective capital borrowed on each tranche of debt divided by the sum of the results
Average fixed cost of debt The fixed cost of debt of each of the Group’s debt facilities, multiplied by the respective
capital borrowed on each tranche of debt divided by the sum of the results
Average valuation net initial yield The annualised rents at valuation date of the entire portfolio, net of costs, expressed as
apercentage of the independent valuation of the Group’s investment property, after
adding purchase costs paid
Completion The point at which ownership of the property is legally transferred by dating the
transfer deed
Dividend per share The total dividend paid and proposed in respect of aperiod divided by the number of
ordinary shares eligible for the dividend on the record date
Exchange The point on aproperty transaction at which the contract to sell is exchanged and dated
and becomes legally binding
Forward commitment A property transaction in which contracts are exchanged subject to the completed
development of apre-let asset with. The risks and rewards are transferred at the point
of completion after practical completion of the development is reached
Forward funded A property transaction in which land is acquired subject to afunding agreement with
the developer to build apre-let asset with approved planning permission. The risks and
rewards are transferred at land completion prior to the commencement of development
Geared internal rate of return A measure of the profitability of an investment property ignoring external factors being
the discount rate at which all the associated cash flows of the investment property, net
of related borrowings and interest costs, are equal to zero
IPO Initial public offering
Liquidity The extent to which investments can be realised at short notice
Loan to value The carrying value of bank borrowings as apercentage of the carrying value of
totalassets
Market capitalisation The mid-market price for an ordinary share of the Company multiplied by the number
ofordinary shares in issue
MEES Minimum energy efficient standards
Net initial yield The current annualised rent, net of costs, expressed as apercentage of capital value,
after adding notional purchaser’s costs
Portfolio valuation The total value of the Group’s investment property including capital commitments on
forward funded assets determined by the independent valuer on an individual asset
basis and assuming no portfolio premium
Practical completion The point at which abuilding project is complete, except for minor defects that can
beput right without undue interference or disturbance to the tenant
Pro-forma LTV This includes total drawn debt net of uncommitted cash over the portfolio valuation,
assets that had exchanged but not completed and forward funded capital commitments
as at 31 March 2023
Total shareholder return The growth in value of ashareholding over aspecified period, assuming dividends are
reinvested to purchase additional units of stock
Glossary
132 LXi REIT plc Annual Report 2023
Overview Strategic Report Governance Financial Statements Additional Information
Company information
Company number: 10535081
Country of incorporation: England and Wales
Directors, Management and Advisors
Non-Executive Directors
Cyrus Ardalan (Chairman)
Hugh Seaborn
Ismat Levin
John Cartwright
Nick Leslau
Sandy Gumm
Registered office
AIFM
Alvarium Fund Managers (UK) Limited
10 Old Burlington Street
London
W1S 3AG
Investment Advisor
LXI REIT Advisors Limited
10 Old Burlington Street
London
W1S 3AG
Company secretary
Law Debenture Corporation plc
8th Floor
100 Bishopsgate
London
EC2N 4AG
Joint broker
Barclays Bank PLC
1 Churchill Place
London
E14 5HP
Joint broker
Jefferies International Limited
100 Bishopsgate
London
EC2N 4JL
Communications adviser
H/advisors
3 Pancras Square
London
N1C 4AG
Depositary
Langham Hall UK Depositary LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Registrar
Link Group
10th Floor, Central Square
29 Wellington Street
Leeds
LS1 4DL
Administrator
Langham Hall UK Services LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Legal advisers
Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH
LXi REIT plc Annual Report 2023 133
LXi REIT plc
6th Floor
125 London Wall
London
EC2Y 5AS
www.lxireit.com