Kimmre have advised M&G on the structuring of a new 65-year income strip from LXi REIT, representing 30% of the annual rental income received from the company’s Thorpe Park and Alton Towers assets, for £257m.

The proceeds of the sale will be used to fully repay the £232m of debt currently secured against the two assets as well as Warwick Castle. All the properties are leased to and operated by Merlin. The price reflects a net initial yield of 2.96%.

The deal structure comprises the sale of the freehold of the two assets to M&G, with 999-year leases granted back to LXi, which will pay an annual aggregate rent of £8.2m. This allows the company to buy back the freehold for a nominal price of £1 in on the 65th year, and retaining 70% of the rental income, the freehold and all reversionary value after 65 years.

The assets are let to Merlin with a WAULT of 55 years until first break, with a 35-year extension option on expiry. Rental payments under the leases will remain unchanged with annual uplifts of CPI+0.5%.

Kimmre, provided full operational underwriting analysis on behalf of M&G, demonstrating their ability to provide complex operational advice on challenging and unique asset classes.

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