Morning, ladies and gentlemen, and thank you very much for giving up an hour or so of your morning at relatively short notice. So obviously we're here to talk about the proposed merger between LondonMetric and LXi PLC. I've got a presentation. I'm gonna turn some slides relatively quickly for you 'cause, you know, you've got presentations in front of you. I'm gonna start off and then gonna hand over to Martin. I'll come back then to open up the floor and the lines for some Q&A.
On the top table, for those who can't see us, who are on the phone, we've got Martin McGann, who you know is the CFO at LMP, and we've got Nick Leslau, who's a non-exec at LXI, and who we have invited to join the board of the enlarged group, should the merger be successful. So look, before I do actually open up the slides, I mean, this from an LMP perspective, excellent opportunity to acquire assets that fit into our what are called triple net income thematic. It allows us to leverage our management platform, obviously over a much bigger pitch. I mean, we get to think about a portfolio of about just over GBP 6 billion, GBP 6.2 billion.
But let's be absolutely clear, this is not about getting bigger for the sake of it. It's actually about being able to do a better job, to do a cheaper job, and actually to give us greater scale, improved liquidity. And also, importantly, looking forward, it's access actually to different deals, you know, bigger deals. You know, deals that actually we don't know where they are at the moment, but they're gonna come. And these are deals that at the moment, in the market that we work in today, is largely the preserve of the U.S. private equity players. And quite frankly, they've been incredibly successful over the last decade or so of picking up some of these transactions. I'm being brutal about it. We want some of it. All right?
The Americans shouldn't get it all their own way, and this platform will give us that opportunity to take advantage of that. We think market timing is good. The good thing is that, you know, we think legacy sectors, you know, shopping malls, offices, operational retail assets, are being increasingly disrupted. And the good news, we don't have any. Alternatives are growing in popularity, and we will have plenty.
Debt markets will open up to us. They'll give us better optionality, and Martin's promised me that we're gonna get cheaper debt. And look, the fact of the matter is, the opportunities are coming, whether or not it's refinancings. You know, there's a huge amount of refinancings. I mean, Nick and I talked about it yesterday. You know, there's about GBP 50 billion that's coming up over the next year or so in the U.K. There's debt...
You know, there's life fund expiries, there's redemptions every single day, every single month. That's assuming one of the vehicles hasn't closed down that option for investors. So that will allow us to access opportunities both in size, but also with speed. And I don't think there's any other REIT in the U.K. that can say that. So let's just turn to the more formal part of the morning, which is the presentation. Let's start on page three, the transaction summary. As you can read, you know, this is a recommended all-share merger of 0.55 LMP shares for each LXI share. It's been worked out on an adjusted NTA to an adjusted NTA.
It's a 13.4% premium to the LXi one-month VWAP, and it comes, as I say, with both boards' unanimous recommendations. Nick is not only being invited to join the board, but he will retain his material shareholding, which he is doing voluntarily. We think that there's compelling logic and portfolio rationale to putting these two businesses together. It creates the U.K.'s first triple net income REIT of scale, as I said, with GBP 6.2 billion worth of assets. Rent roll of nearly GBP 350 million. Importantly for me, it is the fact that the assets are aligned to structurally supported sectors, okay? The great thing about you know, critical real estate, operationally important real estate, is that actually you're going to enjoy an incredible tailwind.
There's too many sectors in the U.K. real estate market today that have got a turbulent headwind coming at them. We're fortunate that we won't have exposure to those difficult, disrupted sectors. We've agreed terms to acquire LXi REIT Advisors, as you can see there, for GBP 26 million. That will take place upon closing of the merger. With the exception of the two senior management at LXi REIT Advisors, the rest of the team obviously will be welcome to join the LMP platform. The combined group will be internal. We think that's important for a number of reasons when you get to this sort of scale, and it also ensures strong shareholder alignment.
The financial benefits available to both sets of shareholders mean that we will be able to pass through some substantial cost operating synergies, which allow us to drive, further earnings progression and obviously dividend growth. As you know, as you all know, I have an ambition that LMP should eventually become a dividend aristocrat. This is our ninth year of progression. We're well on our way to confirming that we can do 10. Only 15 more years to go. Which I hope, I hope I'm around to see that out, in more ways than one. The strong capital structure of both companies means that we'll have a conservative LTV, 31%, and as Martin will talk about in a minute, well staggered, excuse me, debt maturities.
As you can see there, LondonMetric will be targeting a full year, excuse me, dividend increase of 7.4%, which will be a final quarterly dividend of three pence on top of the 2.4 quarterlies that we've been paying so far this year, which will, which will give you a total dividend for the year of 10.2. That's up from 9.5 last year... So this is probably the most important slide of this morning. Martin might argue about that. But this is the transaction rationale. As I've already touched on, it creates the U.K.'s leading triple net lease REIT, a new U.K. major, an NTA of just over GBP 4 billion. Total portfolio of just over GBP 6.2 billion, and as I said, very, very importantly, in structurally supported sectors.
You know, we don't have any exposure to asset classes that we consider to be melting ice cubes. The portfolio is aligned, as I say, to our triple net thematic, mission-critical assets, key operating buildings. And the merger allows us to extract what we think will be substantial cost and operating synergies. As you can see there, a targeted EPRA cost ratio of 7.8%. Can't be more specific than that, unfortunately, 'cause I'm bound by certain guidelines. It will be an internally managed REIT with deep real estate experience. There is not only on the top table, but also in the room, in the front row, there was a lot of gray hair at LondonMetric, some with more than others.
The capital structure will give us, I say, scale, liquidity, and cheaper debt, but it will also importantly give us access to a bigger pool of new, larger opportunities, and that is as attractive to us as the other economies of scale that come by putting these two businesses together. This, as I said to somebody this morning, this is not our first rodeo. This is our second M&A deal this year, and it does underscore our ambition to grow our earnings to unlock shareholder value. We are fully aligned. You know, as I said, Nick will be rolling over all the shares, and as for those of you who don't know, I mean, I've never sold a share in LondonMetric, apart from to pass some money to the taxman.
So turning to slide five, for those of you on the phone, creation of the U.K.'s leading triple net REIT. This builds on our existing strategy of owning triple net assets that benefit from consumer tailwinds. We embrace the net lease model. We've done that, and it, it's one of the reasons why our existing, EPRA cost ratios and the LXI cost ratios are so, are so efficient. And it's a model that has been successfully established in scale on the other side of the pond and in other parts of the globe. The merger does create, you know, one of the largest U.K. REITs, as I said, there with, with, with an EPRA NTA of just over GBP 4 billion, and that scale will bring better liquidity, enhanced credit credentials, cheaper debt, and access to bigger opportunities.
Just to put it in context, so Realty, who would be the largest triple net player in the U.S., you know, we're talking about an NTA here of GBP 4.1 billion. I think Realty, Ashish, Realty raised... Where's Ashish? There he is. Realty raised last year alone, $4 billion in fresh equity. That's how big the scale of this opportunity can be. We're not yet looking at that. So how's the portfolio gonna look? As I said already, it is exposed to structurally supported sectors. That doesn't mean that we're gonna love all the assets. We never have done. You know, we have been active, capital recyclers over our careers, and that won't, that won't change. But looking at the pie chart on the left-hand side, as you can see there, logistics will remain our strongest conviction call.
But you know, and convenience, the two businesses have shared a view that the convenience grocery market is particularly attractive. So that sits in neatly. It will bring to LMP, you know, new exposures to healthcare, hospitality, and entertainment. And you know, that's part of the business that, you know, we will get to understand a little bit better. We certainly understand the consumer tailwinds that come by owning critical mission-critical assets in that sector. And the truth of the matter is, we're allocators of capital. We'll continue to, you know, we will continue to love assets that love us back. And if an asset doesn't, you know, doesn't meet our return hurdles, then it will be put in the departure lounge.
It's forever been thus at LondonMetric, and that will continue. We are not stamp collectors. You know, we never marry our assets. We save emotion for our family and friends. But we do believe that logistics at the moment is probably offering us the highest organic rental growth across the U.K. real estate market, and that will, that's why it's one of our strongest conviction calls. So the investment strategy, as I said, it will continue to be allocating capital to where it enjoys the structural tailwind. We have no legacy assets, as I've already said. We will continue to think about how technology is disrupting consumer behavior. Those are two powerful forces that we cannot ignore. All right? You know, this is not about whether or not it's cyclical.
This is, you know, there's some structural changes taking place. I stood up here a couple of months ago, probably weeks ago, to talk about how we think that the polarization across subsectors is gonna remain incredibly wide, and that is being driven by changing consumer behavior. You know, touched on the logistics market, and those of you who know, have known me a long time, you know my views on that. Similarly, I have strong views on the convenience market, and one only has to look at the M&S numbers this morning or the Sainsbury's numbers yesterday to see what's happening in the convenience food market. It's enjoying an incredible, incredibly strong tailwind. And we continue to be attracted by that because of changing and evolving consumer behavior for instant gratification.
Healthcare and hospitality, they are new sectors to us, but again, they are ones that are supported by demographics and an aging population. We think that's incredibly important. And hospitality, our big exposure, you know, will be to, Merlin, who are the second largest visitor attraction business after Disney in the world.
And again, it does play to this view that the consumer wants experiences over more stuff.... you know, we are not a massive fan of general merchandise retailing. You know, we're more into wanting, you know, essentials or experiences, and that does play to that thematic. But like I said, we won't love every asset, you know, it's just a fact. You know, beauty is in the eye of the beholder. And we're incredibly supportive of the transaction that Simon and his team executed on Monday. The sale of 66, you know, Travelodge hotels.
No easy feat, but that was a great disposal, and we were incredibly supportive of him and his team of what he did there, and we thank him for that. Looking at the income slide, reliable, repetitive and growing income. You know, we've talked about these three key themes for a long time. It is important. And our intention will be, you know, to continue to be the most effective collector, compounder of rental income. We will be able to do that with little income drag, little vacancy. As you can see there, 99, probably 99 point something, occupancy there. Very long leases. Annual reviews, you know, that's something that will benefit us because it will give us optionality when we come to think about disposals. Contractual rental uplifts, 80%.
It's probably a bit higher than I would like, to be honest, but it. You know, it's a first world problem. You know, it's wonderful to know that your income's gonna grow up, whether or not, you know, go up, whether or not we turn up in the office or not. I mean, it's you know, it's incredibly gratifying. And just touching here on the top 6 assets of the combined group. So Ramsay's Hospital, Alton Towers, and then some of the LondonMetric logistics developments. Bedford Link, which is one we built ourselves. To gain similarly, the million at one point, just under 1.1 million sq ft Primark that we've got in Islip, and our very under-rented Tesco Store bought in Dagenham, and as you can see there, Thorpe Park.
But as you can see there, you know, the top 10 assets account for 20%, so there's an awful long tail, and that's something that we will continue to deal with. You know, and like I said, we will undoubtedly trim. It's, it's just, it's natural. And that's something that will keep our combined team, I suspect, busy for the next year or so, and that will, you know, also play into when you look at our top 10 credit exposures. You know, that has changed dramatically, I suspect, even, even for, you know, for LXI, that's changed dramatically over the years. And transactions like the Travelodge that, that Simon and his team did on Monday, you know, move those numbers around, that, that is definitely going to happen.
I mean, to put that into context, you know, so we're now in coming up to our... We're actually in our tenth year, I think, of the merger between Metric and London & Stamford. We've actually sold every single asset that we got from London & Stamford, with the exception of one, and that's the one that we demolished to redevelop. So I'm not suggesting that's gonna happen again, but it just goes to show how time, as time moves on, it's amazing how much you can achieve in relatively short periods of time. You know, 39% of the Mucklow portfolio that was acquired four and a half years ago has been sold. You know, I mean, we never thought we would do that.
Certainly, Rupert didn't think we were gonna do that. But it's just the way it is. You know, it's how we look at real estate. So this portfolio will obviously look a little bit different in a year or two's time as well. But the thematic around triple net income, you know, what I call the three Cs: collect, compound and watch the yields compress. So on that note, looking on page, what are we on now? 10. You know, there's a slide down in investment activity, buying and selling M&A transactions over the last, what is it? Actually, it's not even over five years, it's over four and a bit years. You know, totaling GBP 2.8 billion.
You know, that underscores some of the comments I've made about not marrying your portfolio. Our value continues to grow, obviously largely dependent upon not only on our own activity, but also the value's view of our portfolio worth. But important to us is earnings. You know, if you're gonna be a Dividend Aristocrat, you've got to grow your earnings. You know, our dividend has to be progressive, but we also want it to be covered, and so that is sacred to us, and that's why you see a relatively attractive earnings graph there.
And total shareholder return, again, you know, we try and influence this as best we can, being in the right sectors, making the right macro calls, because that is actually more important than the micro. But obviously, external events and external data and economic outlooks plays its part, too. But all we can do is make sure that we park our boats in the right parts of the river, and that we can enjoy those, you know, when the tide comes in, we will rise faster and higher than some of our competitors. So on that note, I'm going to pass over to Martin, who's got a couple of slides, and then we'll open up to Q&A.
Like I said, I've got—we've got Nick here to take any questions as well from the LXi side. So, Mart?
Morning. I always say to myself: Don't be overly sensitive. He will have a crack at London & Stamford at some point. But at least I'm still here. So our, our focus in the last 12 months has been on strengthening the balance sheet and the use of disposal proceeds to reduce debt, reduce gearing, and having already taken out near-term refinancing risk by the new facilities we put in place here at the back end of 2022. Therefore, we are unwilling to input material refinancing risk into the business through this transaction. So in a... The messy debt structure is materially unsecured. The, the LXi debt structure is entirely secured. The scale of the, of the LXi secured debt would have put us into breach of our existing secured debt basket covenants....
Therefore, we've replaced two secured facilities ahead of this transaction, amounting to GBP 625 million, with new unsecured facilities on improved terms. We have agreed GBP 700 million of new facilities, comprising a GBP 560 million four-year RCF and a GBP 140 million two-year term loan, on terms broadly consistent with LNP's existing RCFs, and on better terms than the facilities it's replacing, and also delivering additional liquidity. Consequently, our average cost of debt will be 3.9%, our debt maturity will remain at six years, and our interest cover will be 3.8x against a covenant level of 1.5x . Following completion, we will have GBP 740 million of undrawn facilities.
The enlarged group's drawn debt will be 100% hedged, and the LTV will be 31%, taking account of the Travelodge sale that Andrew's already mentioned. We will explore a new credit rating, given the increased scale of the enlarged group, and that should allow us to access a broader range, as Andrew said, better priced financing. I accept the challenge. The debt maturity profile for the enlarged group ensures that refinancing risk is well managed. Minor maturities will be dealt with through headroom or the proceeds of continuing non-core sales, and there will be no key refinancings until FY 2026. Within our allowable secured debt baskets, we will continue to run existing secured debt until maturity to avoid early repayment penalties, and we will seek plus one options to our evolving credit facilities to extend our maturities wherever possible.
We've been delighted through this transaction with the support shown to us by our relationship banks, and also by new lenders who have come on board as part of this transaction. Their support, I think, underscores their faith in the team, the quality of the portfolio, and the income streams we will now have available to us. Yep.
Cool. There's a slide on page 13 with the transaction structure and timetable, timeline. I actually don't intend to read that out. You could probably do it more efficiently and effectively than I can. But look, before I just open up to any questions, either in the room or on the line, let's be very clear here, this does not... This transaction for us does not affect how we think or how we operate. Our culture will remain intact. Our strategy will not change. We will only invest in structurally supported sectors, triple net assets with income growth, whether or not it's contractual or organic.
And I would just finally say, it is very rare for us to get unencumbered access to a business with such a complementary strategy, and also deal with a board that is so commercially tuned in to what's right for shareholders, as opposed to their own personal positions. That is very, very rare. Happy to name the companies that, that don't fall into that category. But probably ought to do that privately. You know, the LXI team, you know, should be congratulated for that. And finally, this deal does underscore our ambitions to access new opportunities that will accelerate our earnings, leverage our platform, and ultimately to deliver the best possible performance for our shareholders, and we are eternally grateful for their ongoing support. So on that note, it's been pretty swift. I'm very happy to take some questions.
Let's start maybe in the room, and there might be some online, and or on the phone, if somebody does want to. Any questions in the room? God, that's easy. I wish it was like that, the normal results presentations. I've got a couple in front of me, if I wanna read those out. So Andrew Saunders at Shore Cap. "What are our views on your leading tenants about the merger? What are the expected exceptional costs relating to the deal?" Well, apart from the banking fees being too high, I mean, obviously, we set out here the costs of buying out the management contract at 26, which we've agreed to GBP 26 million. I can't think of any other exceptional costs. Mark, can you?
Like I said, apart from the bankers.
No, no, it's deal-specific costs-
Yeah
... you know, banking, legal fees.
And then I, Svetlana, "Does the merger require CMA clearance?" I don't think so. So that's good news. So that's all I've got actually on the screen in front of me. Are there any questions on the lines?
So Adib, if you would like to remind people how to ask a question, please. Thank you. If you would like to ask a question on today's call, please press star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We currently have no questions coming through. As a reminder, if you would like to ask a question, please press star one now. There are no questions at this time. I will hand over to the web questions, please.
Okay, no questions. I'm gonna take that as a positive that this was an amazing presentation. I know some of you might think that there's an alternative answer to that, but anyway, I'm gonna take the positives. Glass is half full.
I think we should make a note of we don't give them any notice. They don't ask any questions.
Look, thank you ever so much, all of you, those on the line and those in the room, for your time this morning, and obviously, we'll hang around if you do have, if you've got some private questions to ask. Thank you ever so much.