UK-based Supermarket Income Reit has acquired a Tesco supermarket in Ashford, Kent, as it pursues earnings-enhancing acquisitions to deliver a growing and fully covered dividend over the long term.
The company acquired the supermarket for £54.1m, excluding acquisition costs, reflecting an attractive net initial yield of 7%, it said on Monday.
The acquisition consists of about 8,640m2 gross internal area omnichannel supermarket and a petrol filling station, situated on a 3.3ha site.
Tesco has traded from the site for more than 30 years and uses the store as an online fulfilment hub with 14 home delivery vans, as well as offering Click & Collect services.
The store is being acquired with an unexpired lease term of nine years.
Supermarket Income Reit said the current market conditions provided an attractive buying opportunity, at an inflection point in the real estate cycle where supermarket property valuations were at multiyear lows and long lease inflation linked assets could be acquired at accretive yields.
The acquisition represents the first transaction for the company as it redeploys the proceeds arising from the formation of its recently announced strategic joint venture with funds managed by Blue Owl Capital into a pipeline of attractive investment opportunities.
“I’m very pleased that we have begun redeploying the proceeds arising from our recent joint venture, acquiring this top trading Tesco supermarket at an attractive price, which will make a material contribution to our earnings from day one,” said Rob Abraham, CEO of Supermarket Income Reit.
“The team continues to work hard to execute on a number of further pipeline opportunities as it focuses on scaling the business while delivering sustainable earnings growth for our shareholders,” he said.
In May the company completed a £90m refinancing through a new, unsecured debt facility with Barclays.
The facility would be used to refinance its existing secured debt facilities with Wells Fargo and Bayerische Landesbank of £30m and £55.4m, respectively, which are due to mature in the next 12 months and will be cancelled in full.
In April, the company and US asset manager Blue Owl Capital announced they had set up a £403m joint venture (JV) that will result in the UK-based firm selling eight properties to the US asset manager in return for a 50% stake in the new structure.
The JV provided a platform for further growth, seeking to acquire additional high-yielding supermarket assets, with a view to grow the assets to as much as £1bn over the coming years, the company said when announcing the JV.
Abraham said the venture with Blue Owl, which oversaw more than $250bn in assets, brought in a strong, strategic capital partner that shared the company’s belief in the value of high-yielding UK supermarkets.
The company invests in supermarket property, notably omnichannel stores that provide in-store shopping as well as operating as last-mile online grocery fulfilment centres for home delivery and click and collect.
It has a portfolio of 82 stores valued at £1.8bn located in the UK, Northern Ireland and France. Its properties are let to established grocers in the UK and France, including Tesco, Sainsbury’s, Carrefour, Marks & Spencer, Waitrose, Asda, Aldi, Lidl and Morrisons.
The group was granted a secondary listing on the JSE in December last year.
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