Supermarket Income REIT acquires two assets in £83m deal

Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust providing secure, inflation-protected, long-term income from grocery properties in the UK, announces the acquisition of a Tesco supermarket , M&S Foodhall and an Iceland in Chineham, Basingstoke, and the acquisition of an Asda supermarket in Carcroft, Doncaster, for a total purchase price of £82.9 million (excluding acquisition costs), reflecting a combined net initial yield of 4.9%.

The 18.7-acre Chineham site was acquired from Tellon Capital and includes a 60,938-square-foot Tesco supermarket with a large omnichannel operation, a 16-pump petrol station and 878 parking spaces. The store is an online hub for Tesco, operating 13 home delivery vans and a dedicated Click & Collect facility in the car park. The property also includes an M&S Foodhall, Iceland and other complementary non-food tenants. The Tesco store has a remaining lease term of 12 years and is subject to five-year open market rent reviews.

The Asda store in Carcroft comprises a 45,813 square foot net selling area omnichannel supermarket which sits on a 5.2 acre site and includes 340 parking spaces. Asda has operated from the site since the 1970s, with the store being fully refurbished in 2019. The store supports Asda’s online fulfillment in the region via Click & Collect. The property was acquired through a direct sale and leaseback transaction with Asda under a new 100-year lease. The property is subject to five-year upward only rent reviews linked to the CPI (subject to a cap of 2.5% and a floor of 0.0%).

Debt Financing Update

The Company has entered into a new £412.1 million unsecured credit facility with a syndicate of banks comprising Barclays, Royal Bank of Canada, Wells Fargo and Royal Bank of Scotland International. This is the first time the Company has had access to unsecured debt financing.

The new unsecured facility consists of three tranches:

  • Five-year £250.0m revolving credit facility (with two further one-year extension options, up to a maximum term of seven years);
  • Term loan of £100.0 million over three years (with two further one-year extension options, up to a maximum term of five years); and one
  • £62.1m 18-month term loan (with an option to extend a further 18 months, up to a maximum term of three years)

The new unsecured facility has a 1.5% margin over SONIA and a weighted average term of 6 years.1

The new unsecured facility will be used in part to refinance £255.0 million of existing secured commitments in addition to providing additional debt capital to continue to fund the company’s growth.

The Company was advised on the new credit facility by Rothschild & Co.

Ben Green, Director of Atrato Capital Limited, the investment adviser to Supermarket Income REIT plc, said: “These acquisitions further strengthen and complement SUPR’s portfolio. Chineham Park was a rare opportunity to acquire a Tesco, an M&S Foodhall and an Iceland in a single transaction. The Asda acquisition represents the longest-lived asset in the portfolio with a very long lease of 100 years.

The new unsecured facility is a significant milestone for SUPR, as the breadth and quality of the portfolio now allows the Company to finance itself on an unsecured basis. We are delighted with the level of financial support received from our existing and new partner banks, affirming the robust nature of the grocery sector. »