Alton Towers landlord agrees ‘innovative’ £257m property deal

Property investor LXi REIT has agreed an unusual deal to forward-sell income from theme parks Alton Towers and Thorpe Park to pay off £232m debt.

LXi agreed a £385m takeover of Secure Income REIT earlier this year. Secure Income’s portfolio included Alton Towers, Thorpe Park and Warwick Castle, with long-term deals in place with leisure operator Merlin Entertainments.

LXi has sold a 65-year “income strip” to an unnamed UK institution for £257m. It represents 30% of the annual rental income received from the Thorpe Park and Alton Towers assets, operated by Merlin.

The proceeds will be used to fully repay the £232m of debt LXi has secured against Thorpe Park and Alton Towers, as well as Warwick Castle.

The deal is structured so LXi has sold the freehold of the properties, but taken 999-year leases and will pay annual rent of £8.2m. LXi said this is “a small proportion” of the underlying profits from the Merlin deal.

LXi can then acquire the freehold back from the buyer for a nominal price of £1 in 2087. Merlin currently has 55 years left until its first break.

Simon Lee, fund manager of LXi REIT, said: “We are delighted to have signed this innovative transaction, which materially reduces the company’s debt levels whilst generating significant earnings accretion.”

The debt that is being repaid was costing 4.95% per year, so the deal “has created a material level of earnings accretion”, the company said.

The debt repayment also reduces LXi’s pro forma loan-to-value (LTV) from 37% to 33%, in line with its aim of maintaining a medium-term LTV target of 30%.

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