I looked at LXI a few days ago following MDW's post about REITs to me. I randomly picked LXI from a list of 20+REITs on the LSE with market capital >£1bn. I too spotted the dividend 'trim' for Covid but also the short history to go on, only since 2017.
Foolishly I read through some early (2017!) RNS when they were on a spending spree initally. They do seem to churn their properties. There was also a curious note in the financial reports that the board was subcontracting trust management to another LXI company. That company took over £4m in fees in 2019 (last year available on Companies House), but only had miniscule costs from (presumably) running the trust. The bulk as a £3m+ dividend was passed on up the line to another company sitting above them both. That's ~15% of the dividend the Plc shareholders received. Yet it's the shareholders, not the management company, taking the risk.
I mention all this because often with equity investment the firm being invested in is at the "top of the tree". There is no parent company sitting above. Think Vodafone or Tesco. With REITs (and it's possibly true of the pair we hold SGRO/BLND) it's a bit more unclear and in this case the nested management structure seems to be soaking ~15% of the profits with none of the risk. Now, that might be common for REITs for all I know and I'm unfairly singling out LXI. It just seemed a bit rich, and slightly whiffs of the 'wise' for my liking.
If I was a shareholder I might be asking question of the Plc board over whether they get value from the advisor? Or, for the £800k advisor COST each year, could the Plc board do better and save paying out £4.3m?
Sometimes, even with HYP, it's perhaps worth taking a 20 minute look at a company before deciding to invest.
DETAILSThe listed REIT you can invest in is LXI REIT Plc.
https://find-and-update.company-informa ... y/10535081The Annual Report to March 2021 talks about the "Investment Advisor" and makes it sound like some arm's length or specialist expert, whereas it's actually LXI REIT Advisors Ltd. Why split into two firms? Why not just run the Plc with the same people who staff the 'advisor'?
https://find-and-update.company-informa ... y/10537567The Investment Advisor's fee isn't based on effort. Rather, on the Plc market cap. So, the more people invest the more the advisors make.
From Plc 2021 annual results:
The investment advisory fee is calculated in arrears in respect of each month, in each case based upon the average market capitalisation of the Company on the following basis:
(a) One-twelfth of 0.75% per calendar month of market capitalisation up to or equal to £500 million; and
(b) One-twelfth of 0.65% per calendar month of market capitalisation above £500 million.
In turn, LXI REIT Advisors Ltd last published accounts for 2019 showed turnover £4.3m (fees from the Plc), and costs of only £0.8m leaving net profit after tax of £2.7m (net margin of 63% - nice work if you can get it!). A dividend of £3.3m was paid out, presumably to Alvarium Re Ltd that has a controlling interest in LXI REIT Advisors Ltd and shares many of the same directors. That dividend is around 15% of the dividend shareholders in the Plc received.