REG - Supermarket Inc REIT - Acquisition and update on strategic developments

Supermarket Income REITAnnouncement

18/11/2024 07:00

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RNS Number : 5565M  Supermarket Income REIT PLC  18 November 2024

SUPERMARKET INCOME REIT PLC

(the "Company")

 

ACQUISITION OF A SAINSBURY'S IN HUDDERSFIELD at 7.6% NIY AND UPDATE ON
STRATEGIC DEVELOPMENTS

 

Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust with
secure, inflation-linked, long-dated income from grocery property, announces
the acquisition of a Sainsbury's omnichannel supermarket in Huddersfield, West
Yorkshire, for a total purchase price of £49.7 million (excluding acquisition
costs), reflecting an attractive net initial yield of 7.6% 1  (#_ftn1) (the
"Acquisition").

 

Sainsbury's acquisition

 

The Acquisition of this top quartile performing food store comprises a 113,348
sq ft gross internal area omnichannel supermarket and a petrol filling
station, situated on an 8.5 acre site. Sainsbury's has traded from the site
for over 30 years. The store is an online fulfilment hub for the operator with
12 home delivery vans and Click & Collect services. The store is being
acquired with an unexpired lease term of 11 years with annual RPI-linked rent
reviews (subject to a 4% cap and a 0% floor).

 

The Acquisition has been funded through the drawdown of the Company's existing
debt facility. Following the Acquisition, the Company's LTV is 39% with a
portfolio WAULT of 12 years. The Acquisition represents attractive value at
pricing agreed earlier in the year. We are now seeing heightened levels of
competition for assets. This provides the Board with further confidence in
property valuations.

The Acquisition further increases the Company's rental income from investment
grade covenants and supports its strategy to pay a progressive dividend.

 

Update on strategic developments

 

The Acquisition is a continuation of the Company's strategy to grow earnings
through a combination of accretive acquisitions, capital re-cycling and cost
savings, thereby supporting growing dividends to shareholders.

 

It comes amid a period of significant strategic and operational development
for the Company, designed to enhance its earnings and dividend growth
potential:

 

·    As announced on 5 November 2024, the Company has reached an agreement
with its investment adviser, Atrato Capital Limited (the "Investment
Adviser"), which will see the basis of the management fee calculation move
from net asset value to market capitalisation, effective from 1 July 2025, as
well as transfer its outsourced AIFM, Company Secretarial and payments
processing functions to the Investment Adviser. If approved by shareholders at
the AGM on 16 December 2024, the combination of these changes will deliver
material cost savings to the Company and is expected to deliver an increase in
earnings for the 2025-2026 and future financial years.

·    Following the initial investment into France earlier this year, and
following recent engagement with shareholders, the Company will be seeking
shareholder approval at its AGM to amend its investment objective and policy
to provide greater flexibility to take advantage of appropriate earnings
accretive acquisition opportunities in Europe. The Company intends to take an
incremental approach to gradually increase its exposure to European assets.

·    The Company is also actively exploring opportunities to recycle
capital opportunistically through individual asset sales and potential joint
ventures at attractive valuations. Depending on market conditions, proceeds
from asset sales or a JV transaction could be recycled into more accretive
assets, used to reduce debt or for share buybacks.

·    The Company is exploring opportunities to re-gear a number of its
shorter leases, which would extend the portfolio WAULT and demonstrate the
operators' long-term commitment to these strong trading omnichannel locations.

·    The Company is pleased with the initial indicative demand for its
shares from South African investors and is progressing through the
administrative and regulatory steps in anticipation of a secondary listing on
the JSE. A further update will be announced when the timing of the listing is
confirmed.

 

The Company's balance sheet remains robust with £75 million of remaining
headroom in its debt facilities. The weighted average maturity of the
Company's debt facilities is 3.8 years 2  (#_ftn2) and over 90% of the debt is
currently fixed at an average rate of 4%. The contracted increases in the
Company's £113.1 million 3  (#_ftn3) passing rent roll are expected to offset
the increase in financing costs currently predicted by the interest rate
markets.

 

The Board continues to review the most appropriate use of capital, including
share buybacks and repaying debt. The Board also acknowledges the benefits to
shareholders of greater scale and a more diversified portfolio.

 

 

Ben Green, Principal of Atrato Capital Limited, the Investment Adviser to
Supermarket Income REIT plc, said:  

 

"The team has been, and remains, incredibly active across a range of strategic
and operational developments, all driven by our focus on delivering value for
shareholders. We are pleased that shareholders will have the ability to vote
on two proposals - to make further improvements to the cost base and to
provide greater flexibility for accretive acquisitions - at the upcoming AGM.

 

We are also very pleased to announce this UK acquisition. We remain highly
focused on driving returns and we continue to explore all avenues to deliver
value for shareholders of Supermarket Income REIT."

 

 

 FOR FURTHER INFORMATION
 Atrato Capital                                                                                       +44 (0)20 3790 8087
 Limited

 Rob Abraham / Mike Perkins / Chris McMahon                                                           ir@atratocapital.com (mailto:ir@atratocapital.com)
                                                                                                       

 Stifel Nicolaus Europe Limited                                                                       +44 (0)20 7710 7600
 Mark Young / Rajpal Padam / Madison Kominski

 Goldman Sachs International                                                                          +44 (0)20 7774 1000

 Tom Hartley / Hannah Mackey

 FTI Consulting                                                                                       +44 (0)20 3727 1000

 Dido Laurimore / Eve Kirmatzis / Andrew Davis                                                        SupermarketIncomeREIT@fticonsulting.com
                                                                                                      (mailto:SupermarketIncomeREIT@fticonsulting.com)

 

NOTES TO EDITORS:  

 

Supermarket Income REIT plc (LSE: SUPR) is a real estate investment trust
dedicated to investing in grocery properties which are an essential part of
the feed the nation infrastructure. The Company focuses on grocery stores
which are omnichannel, fulfilling online and in-person sales. The Company's
supermarkets are let to leading supermarket operators in the UK and Europe,
diversified by both tenant and geography.

 

The Company's assets earn long-dated, secure, inflation-linked, growing
income. The Company targets a progressive dividend and the potential for
capital appreciation over the longer term.

 

The Company is listed on the Closed-ended investment funds category of the
FCA's Official List and its Ordinary Shares are traded on the LSE's Main
Market.

 

Atrato Capital Limited is the Company's Investment Adviser.

 

Further information is available on the Company's website
www.supermarketincomereit.com (http://www.supermarketincomereit.com/)

 

LEI: 2138007FOINJKAM7L537

 

Stifel Nicolaus Europe Limited, which is authorised and regulated in the
United Kingdom by the Financial Conduct Authority, is acting exclusively for
Supermarket Income REIT plc and no one else in connection with this
announcement and will not be responsible to anyone other than the Company for
providing the protections afforded to clients of Stifel Nicolaus Europe
Limited nor for providing advice in connection with the matters referred to in
this announcement.

Goldman Sachs International, which is authorised by the Prudential Regulation
Authority and regulated by the Financial Conduct Authority and the Prudential
Regulation Authority in the United Kingdom, is acting exclusively for
Supermarket Income REIT plc and no one else in connection with this
announcement and will not be responsible to anyone other than the Company for
providing the protections afforded to clients of Goldman Sachs International
nor for providing advice in connection with the matters referred to in this
announcement.

 

 1  (#_ftnref1) NIY achieved on actual transaction costs of 2.3% due to the
acquisition of a corporate entity. Acquisition NIY based on standard purchase
costs of 6.8% is 7.3%

 2  (#_ftnref2) Including extension options

 3  (#_ftnref3) For the 12 month period to 30 June 2024

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