Supermarket Income REIT, which listed on the JSE in late 2024, has issued shareholders with an update regarding its key portfolio initiatives including the sale of Tesco, Newmarket for £63.5 million.
The REIT sold the large format omnichannel store to Tesco plc at a 7.4% premium to the 30th of June 2024 valuation with the passing rent of the store upon disposal £3.5 million.
“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,” comments Nick Hewson, Chair of Supermarket Income REIT plc. “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.”
The Company completed three lease renewals at Tesco stores in Bracknell, Bristol, and Thetford – the three shortest leased Tesco stores in its portfolio. The stores leased have been renewed at an average 4% to turnover, 35% above MSCI’s supermarket benchmark index and 13% above the Company’s valuer’s estimated rental values as at 30th of 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) with the regeared stores expected to benefit from a capital value growth to be fully reflected on the 30th of June 2025 valuation.
Its Weighted Average Unexpired Lease Term (WAULT) has increased from 11 years to 12 years with its next material lease expiry not until 2032.
Supermarket Income REIT also completed the acquisition of a portfolio of a further nine omnichannel Carrefour supermarkets in France, acquired through a direct sale and leaseback transaction with the retailer for a total purchase price of €36.7 million (excluding acquisition costs), at a portfolio net initial yield of 6.8%. It now has 26 Carrefour stores in France, representing c.5% of its gross assets.
The nine stores, which have an average gross internal area of c. 40 000 square feet per store, operate under the Carrefour Market brand with long trading histories and low competition in their catchment areas.
The sale and leaseback portfolio has been acquired on a weighted lease term of 12 years (with a tenant-only break option in year 10), subject to annual uncapped inflation-linked rent reviews. It was financed through a private placement with an institutional investor for €39 million of new senior unsecured 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%.
