REG - Sainsbury(J) PLC - Acquisition of interest in investment vehicles

J SainsburyAnnouncement

14/03/2023 07:15

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RNS Number : 8788S  Sainsbury(J) PLC  14 March 2023

14 March 2023

 

Acquisition of interest in Highbury and Dragon investment vehicles

 

On 21 September 2022, J Sainsbury plc ("Sainsbury's") announced that it had
reached agreement on an acquisition price for stores held in the Highbury and
Dragon investment vehicles. Sainsbury's has held a c.49% interest in Highbury
and Dragon since it was created in 2000. The vehicles comprise the freeholds
of 26 Sainsbury's supermarkets which are leased to Sainsbury's. The remaining
c.51% is owned by Supermarket Income REIT.

 

Today, Sainsbury's announces the exchange of contracts for the purchase of
Supermarket Income REIT's c.51% interest in the Highbury and Dragon investment
vehicles. The purchase will be implemented through an acquisition of
Cornerford Limited, Horndrift Limited, Avenell Property PLC and Hobart
Property PLC (the "Transaction").

 

The Transaction will result in Sainsbury's acquiring the freehold of 21 stores
in the Highbury and Dragon investment vehicles which will continue to be
operated as Sainsbury's supermarkets. The remaining five stores will be sold
by Sainsbury's. Sainsbury's has entered into new 15-year leases on four of
these stores with five yearly open market rent reviews and a tenant break
option at year ten. Following completion of the transaction, Supermarket
Income REIT has the benefit of an option to acquire the four stores which are
subject to the new Sainsbury's leases for a net consideration of £33.2
million (net of SUPR's existing interest and excluding acquisition costs). It
is expected that the one remaining store will be sold at vacant possession
value.

 

The Transaction is expected to complete on 17 March 2023 for a total
consideration of £430.9 million (excluding costs) which will be paid in three
tranches. £279.3 million will be paid on 17 March 2023 and £116.9 million
will be paid on 10 July 2023. The third tranche of £34.7 million is
conditional on the sale of the remaining five stores by Sainsbury's.
Additionally, Sainsbury's will fully fund the Highbury and Dragon bond
redemptions of £170.5 million on 20 March 2023 and £130.4 million on 13 July
2023 respectively. The total consideration and Highbury and Dragon bond
redemptions will be funded by utilising the Group's cash resources and also by
drawing under a committed unsecured term facility.

 

The gross assets acquired as part of the Transaction total £431.5 million.
The entities acquired in the Transaction generated aggregate profits before
tax of £110.4 million in their most recent respective financial years. These
profits, in part, reflected revaluation gains recognised on the investment
properties held in the Highbury and Dragon investment vehicles. Going forward,
Sainsbury's will not recognise revaluation gains and losses on these assets as
they will be held as owner operated freehold stores, instead seeing a
reduction in depreciation and interest expenses, alongside a reduced cash
outflow on rent.

 

Contacts:

Investor Relations:               James Collins     +44 (0) 20
7695 0080

Media:                                  Rebecca
Reilly   +44 (0) 20 7695 7295

 

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