Acquisition and update on strategic developments

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] (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] 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] 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 Limited	[phone]
Rob Abraham / Mike Perkins / Chris McMahon	[e-mail]
Stifel Nicolaus Europe Limited	[phone]
Mark Young / Rajpal Padam / Madison Kominski
Goldman Sachs International  Tom Hartley / Hannah Mackey	[phone]
FTI Consulting	[phone]
Dido Laurimore / Eve Kirmatzis / Andrew Davis	[e-mail]

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   

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.

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[1] 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] Including extension options

[3] For the 12 month period to 30 June 2024

 

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