REG - Supermarket Inc REIT - Update on Portfolio Initiatives

Supermarket Income REITAnnouncement

24/02/2025 07:00

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RNS Number : 1752Y  Supermarket Income REIT PLC  24 February 2025

24 February 2025

SUPERMARKET INCOME REIT PLC 

(the "Company") 

 

UPDATE ON PORTFOLIO INITIATIVES  

 

Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust with
secure, inflation-linked, long-dated income from grocery property, is pleased
to announce its progress against a number of key portfolio initiatives which
were outlined in the announcement on 18 November 2024. These significant
actions demonstrate the attractions of our high quality portfolio, our
conservative valuations and our ability to recycle capital to drive earnings
accretion.

 

Sale of Tesco, Newmarket for £63.5 million

 

The Company has completed the sale of Tesco, Newmarket to its operator, Tesco
plc, for £63.5 million. The sale was completed at a 7.4% premium to the 30
June 2024 valuation. This sale of a large format omnichannel store at an
attractive valuation, underlines the strategic importance of the Company's
assets to the supermarket operators. The passing rent of the store upon
disposal was £3.5 million.

 

In recycling the proceeds, the Board will consider options to create accretive
value for shareholders.

 

The Company continues to actively explore opportunities to recycle capital
through individual asset sales and potential joint ventures at attractive
valuations.

 

Lease renewals - average 4% rent to turnover 1  and 35% above MSCI rents

 

The Company has successfully completed three lease renewals on Tesco stores
located in Bracknell, Bristol and Thetford, which were the three shortest
leased Tesco stores in the Company's portfolio. These store leases have been
renewed at an average 4% rent to turnover(1), 35% above MSCI's supermarket
benchmark index and 13% above the Company's valuer's estimated rental values
(as at 30 June 2024). The leases have been extended to 15 years with annual
RPI-linked rent reviews (subject to a 4% cap and a 0% floor). The regeared
stores are expected to benefit from a capital value growth which will be fully
reflected in the 30 June 2025 valuation.

 

The lease renewals demonstrate the affordable rental levels for the Company's
strong trading, large format omnichannel stores. The Company's WAULT has
increased from 11 years to 12 years 2 . The Company's next material lease
expiry is not until 2032 3 .

 

Earnings enhancing acquisitions - nine omnichannel Carrefour supermarkets in
France

 

The Company has continued to demonstrate its ability to deploy capital into
earnings enhancing assets with an attractive spread to the cost of debt. The
Company has completed the acquisition of a portfolio of a further nine
omnichannel Carrefour supermarkets in France. The stores were acquired through
a direct sale and leaseback transaction ("SLB") with Carrefour, for a total
purchase price of €36.7 million (excluding acquisition costs), at a
portfolio net initial yield of 6.8% 4 . The Company now has 26 Carrefour
stores in France, representing c. 5% 5  of its gross assets.

 

The nine stores, which have an average gross internal area of c. 40,000 sq ft
per store, operate under the Carrefour Market brand and are all well
established with long trading histories and low competition in their catchment
areas. These omnichannel supermarkets form part of Carrefour's "Drive" online
grocery fulfilment network.

 

The SLB portfolio has been acquired on a weighted average lease term of 12
years (with a tenant-only break option in year 10), subject to annual uncapped
inflation-linked rent reviews.

 

This acquisition was financed through a private placement with an
institutional investor for €39 million of new senior unsecured notes (the
"Notes"). The Notes have a maturity of seven years and a fixed rate coupon of
4.1%.

 

Following the placement of the Notes and receipt of proceeds from the sale of
Tesco, Newmarket, the Company has a pro-forma LTV of 38%.

 

Nick Hewson, Chair of Supermarket Income REIT plc, commented:

 

"We have made significant progress on the portfolio initiatives that we set
out in November 2024, which together are intended to support our earnings
growth. These transactions highlight the inherent value of the portfolio, the
importance of these stores for the grocery operators and our ability to
crystalise value as part of our capital recycling strategy. We remain focused
on continuing to make good progress with our remaining strategic initiatives,
including delivering further cost savings for the Company, and we look forward
to updating the market in due course."

 

 

 

 

 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 / Luca Vincenzini

 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, JSE: SRI) 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. The Company also has a secondary listing on the Main Board of the JSE
Limited in South Africa.

 

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  Based on Atrato Capital's estimates

 2  Post: Sale of Tesco, Newmarket, three Tesco lease renewals and the
acquisition of 8 Carrefour stores (plus one Carrefour store for which the
Company has signed a conditional purchase to buy)

 3  Excludes leases where passing rent is <0.3% of annual rent roll

 4  Includes one store for which the Company has signed a conditional purchase
to buy

 5  Exposure by valuations as at 30 June 2024, including post balance sheet
events

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