Shares in LXi REIT (LXI) initially dipped after the commercial property landlord reported an 18% drop in net asset value, blaming higher interest rates and yields. But the stock has rebounded 0.5%.

In the six months to September 30, LXi’s NAV per share fell from 142.8p to 116.4p as the Bank of England’s rate hikes filtered through to property valuations and funding costs.

But chair Cyrus Ardalan said, “Strong operational performance and robust rental growth have served to mitigate the impact.” The FTSE 250 firm hiked its half-year dividend 4.8% to 3.30p.

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Going forward, LXi continues to receive “significant” interest in its portfolio and will selectively sell assets. It aims to own profitable properties “in sectors with the most positive outlooks.”

Despite today’s rebound, LXi shares remain down 16.7% year-to-date amid a wider property sector selloff. But rising rents and resilient demand for its assets could cushion the blow from higher interest rates.