London-based Supermarket Income Reit has completed the acquisition of three UK supermarkets for £98m (R2.2bn), adding to its portfolio of properties with long leases.
The properties, operated by grocers Tesco, Sainsbury’s and Waitrose, are expected to generate rental income equivalent to about 5.5% of their purchase price each year. The stores are located in Aylesbury in Buckinghamshire, Sale in Greater Manchester and Frimley in Surrey, covering both commuter towns and suburban areas.
The largest purchase is a Tesco supermarket in Aylesbury for £56.3m, generating a return of just over 5% a year. The store has traded from the site for more than 40 years and includes fuel, home-delivery and click & collect services.
A Sainsbury’s supermarket in Sale was acquired for £33.8m in an off-market transaction, generating a return of just under 6% a year. The store has operated for nearly 30 years.
The third asset, a Waitrose supermarket in Frimley, was bought for £7.6m, generating a return of around 6% per year. The store has been trading for more than 25 years.
All three properties are on triple-net leases, meaning tenants cover operating and maintenance costs, limiting the landlord’s exposure to rising expenses. Rents are adjusted for inflation.
The acquisitions were funded through existing debt facilities. After completing other planned property deals, the company expects its debt to remain at around 40% of the total value of its property portfolio, while the portfolio’s average lease length will be about 12 years.
Supermarket Income Reit said its exposure to tenants with strong credit ratings is expected to rise to around 75% of the portfolio, assuming the transfer of five stores into its joint venture with Blue Owl Capital Managed Funds.
“We’re on track to have recycled around £400m of capital this year into an attractive pipeline of acquisitions, and we see further opportunities ahead as we remain committed to growing our position as the leading landlord to grocery tenants,” said CEO Rob Abraham.
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