REG - Supermarket Inc REIT - Notice of AGM

Supermarket Income REITAnnouncement

22/11/2024 16:00

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RNS Number : 3925N  Supermarket Income REIT PLC  22 November 2024

22 November 2024

 

SUPERMARKET INCOME REIT PLC

(the "Company")

 

notice of ANNUAL GENERAL MEETING AND SHAREHOLDER RESOLUTIONS

The Board of Directors of Supermarket Income REIT plc (LSE: SUPR), announces
that the Annual General Meeting ("AGM") of the Company will be held on Monday,
16 December 2024 at 12.00 p.m. at the offices of Macfarlanes LLP, 20 Cursitor
Street, London EC4A 1LT. The Notice of AGM has been sent to shareholders and
is also available on the Company's website.

 

In addition to the usual AGM business, the Company will be seeking shareholder
approval to: i) amend its investment objective and policy, and ii) enter into
new service agreements with entities within the Atrato Group. Further details
of both of these matters are outlined below.

 

Proposed amendments to the Company's Investment Policy

 

In Europe, we see an attractive opportunity to broaden our investible universe
and enhance the diversity of our asset and tenant base, particularly following
our inaugural transaction in Europe earlier this year with Carrefour. To that
end, the Board is proposing changes to the Company's Investment Policy to
allow for greater investment in European markets, whilst ensuring the UK
remains our core focus with at least 60% of rental income derived from
properties in the UK let to supermarket operators.

 

The key proposed changes include:

 

·    to expand the geographical area of investment in relation to at least
80% of GAV to cover supermarket operators in both the UK and Europe;

·    to broaden the investment restriction which currently requires the
Company to derive at least 60% of its rental income from a portfolio of
properties let to the largest four UK supermarket operators, to also include
properties located in the UK let to other supermarket operators; and

·    to amend the investment restriction which applies within a
geographical area such that:

o  there will be no more than two assets within a single geographical area;
and

o  no individual grocer tenant will operate more than one of the Company's
grocery real estate assets in any single geographical area where the value of
the two assets combined at the point of acquisition would exceed 10% of the
portfolio gross asset value.

 

If the proposed changes are approved, the Board and Investment Adviser intend
to continue focusing primarily on investing in UK assets whilst taking an
incremental approach to gradually increase the Company's exposure to European
assets, initially in a limited number of countries, and primarily France in
the near term. Investments will continue to align with the Company's strict
investment criteria, targeting high-quality operators and strong trading
omnichannel stores that meet the Company's rigorous standards. The proposed
changes aim to enhance the Company's ability to scale and diversify the
portfolio whilst maintaining tenant covenant strength. Additionally, the
ability to access lower Euro-denominated financing costs will further enhance
earnings accretion.

 

The Company has received written approval from the Financial Conduct Authority
to make the amendments to the Company's Investment Policy described above and
in accordance with the UK Listing Rules, shareholder approval is being sought
for those amendments at the AGM. If approved, the changes to the Investment
Policy will take immediate effect following the AGM.

 

Further details on the changes, along with the full revised Investment Policy,
are provided in the Notice of AGM, available in the Investor Centre of the
Company's website at www.supermarketincomereit.com
(http://www.supermarketincomereit.com) .

 

Entry into New Service Agreements

 

The Company is also voluntarily seeking shareholder approval to enter into new
service agreements with entities within the Atrato Group.

 

As announced on 5 November 2024, the Company's aims to have one of the lowest
EPRA cost ratios in the UK REIT sector and accordingly, the Directors have
worked closely with the Investment Adviser to identify ways to deliver both
material cost savings and even closer alignment with the interests of the
Company and its shareholders.

 

The new investment advisory agreement will see the basis of the calculation of
the management fee change from net asset value ("NAV") to market
capitalisation. While the proposed change will not be implemented until the
start of the Company's next financial year, 1 July 2025, based on the current
share price of 68.5p on 15 November 2024, being the latest practicable date
prior to publication of the Notice of AGM, the Company would save c.£1.9
million per annum compared to the management fee calculated based on the
Company's last published NAV.

 

The AIFM, company secretarial and payment services have previously been
fulfilled by external service providers. The Company will seek to transition
these services to the Atrato Group at a reduced fixed fee level that will
result in further savings of c.£0.3 million per annum for the Company.

 

The Company expects the aggregate annual savings to contribute materially to
earnings per share and therefore dividend cover (based both on its current
market capitalisation relative to NAV, as well as in absolute terms for the
non-investment advisory services). The Directors consider that the New Service
Agreements together represent a fair outcome of negotiations, in particular in
the context of the material reduction in fees from July 2025.

 

Each of the Investment Adviser, the New AIFM and Hafren are related parties of
the Company and entry into the New Service Agreements each constitutes a
relevant related party transaction under UKLR 11.5.4R. While the Company is
not required to obtain shareholder approval in relation to the entry into the
New Service Agreements, it is giving shareholders the opportunity to approve
the entry into the New Service Agreements as a matter of good corporate
governance.

 

The Board considers entry into the New Service Agreements to be fair and
reasonable as far as the shareholders of the Company are concerned, having
been so advised by the Company's sponsor, Stifel Nicolaus Europe Limited.

 

The details of the New Service Agreements have been set out in the appendix of
this announcement and further details can be found in the Notice of AGM.

 

Capitalised terms used in this announcement shall have the meanings ascribed
to them in the Notice of AGM, unless the context otherwise requires.

 

General Meeting

 

The AGM of the Company will be held on Monday, 16 December 2024 at 12.00 p.m.
at the offices of Macfarlanes LLP, 20 Cursitor Street, London EC4A 1LT.

 

As your participation is important to us, we would encourage you to vote ahead
of the AGM by appointing your proxy in the manner described in the notice of
AGM, no later than 12.00 p.m. on Thursday, 12 December 2024.

 

The Notice of AGM, Annual Report and Financial Statements are available to
view in the Investor Centre of the Company's website at
http://www.supermarketincomereit.com and, in accordance with UKLR 6.4.1,
copies of the documents have been submitted to the Financial Conduct Authority
and will shortly be available for inspection from the National Storage
Mechanism at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .

 

 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                                                              SupermarketIncomeREIT@fticonsulting.com
 Davis                                                                                                (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.

 

Appendix

Details of New Service Agreements

 

Subject to and conditional upon the approval of Shareholders at the AGM:
 
(i)            the Company has agreed to enter into a new investment advisory and accounting and administration services agreement with Atrato Capital Limited (the "Investment Adviser") and Atrato Partners Limited (the "New AIFM") (the "New IAA");
 
(ii)           the Company has agreed to enter into a new AIFM Agreement with the New AIFM (the "New AIFM Agreement"); and

 

(iii)          the Company has agreed to enter into a new company secretarial services agreement with Hafren Limited ("Hafren"), an entity within the Atrato Group (the "New Company Secretarial Services Agreement"),

 

(together, the "New Service Agreements"). The New Service Agreements will each become effective by 1 July 2025. The Company's existing investment advisory agreement, AIFM agreement and company secretarial services agreement will each be terminated in connection with entry into the New Service Agreements.
 
The Directors have conducted extensive negotiations with the Investment Adviser, the New AIFM and Hafren with the benefit of independent advice on the terms of the New Service Agreements.

 

(a)  The New IAA

 

The terms of the New IAA will be on materially the same terms as under the
existing investment advisory agreement (the "Existing IAA"), except for the
following:

 

(i)            Basis of fee calculation

 

The basis of the management fee calculation will be changed from net asset
value to market capitalisation, effective from 1 July 2025. The current fee
thresholds and rates applied to the net asset value-based calculations will be
retained as shown below:

 

 Threshold                              Fee rate on revised market capitalisation basis
 Up to £500 million                     0.95%
 Between £500 million to £1 billion     0.75%
 between £1 billion to £1.5 billion     0.65%
 Between £1.5 billion to £2 billion     0.45%
 Above £2 billion                       0.40%

 

(ii)           Timing of fees

 

The Existing IAA provides for 75% of the management fee to be paid monthly and
the remaining 25% of the management fee to be paid semi-annually. The New IAA
provides that 100% of the management fee will be paid monthly such that there
is no semi-annual management fee.

 

(iii)          Termination payment

 

In order to remain aligned with the fee basis with the change from net asset
value to market capitalisation, the termination payment due in the event of a
takeover, delisting or liquidation will be based on the offer value or net
consideration due to shareholders rather than on the prevailing net asset
value of the Company.

 

(iv)         Payment services

 

The Investment Adviser will provide payment services for a fee of £150,000
per annum.

 

(b)  The New AIFM Agreement

 

The New AIFM Agreement is on materially the same terms as the Company's
existing AIFM agreement except as follows:

 

(i)            Fees

 

The New AIFM shall be entitled to receive an annual fee of £135,000 from the
Company.

 

(ii)           AIFM related changes

 

Certain changes have been made to reflect the New AIFM's UK regulated status,
to update regulatory references and to reflect the AIFM's responsibilities
under relevant regulation.

 

(c)   The New Company Secretarial Services Agreement

 

The New Company Secretarial Services Agreement is on materially the same terms
as the Company's existing company secretarial services agreement except as
follows:

 

(i)            Fees

 

Hafren shall be entitled to receive an annual fee of £250,000 from the
Company.

 

(ii)           Term

 

The initial term of the agreement is two years (the initial term of the
Company's existing company secretarial services agreement is 18 months). The
agreement may be terminated on not less than 6 months' notice after the
initial term (the Company's existing company secretarial services agreement
may be terminated on not less than 3 months' written notice after the initial
term).

 

For the avoidance of doubt, each New Service Agreement provides that the
amount of fees or other remuneration payable by the Company to the Investment
Adviser in any twelve-month period, when aggregated with any other fees or
other remuneration payable by the Company to the Investment Adviser or a
member of the Investment Adviser's group shall not exceed 4.99% of the
Company's net asset value.

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