Supermarket Income REIT inks joint venture with Blue Owl

(Sharecast News) - Supermarket Income REIT announced on Thursday that it has entered into a strategic joint venture with funds managed by Blue Owl Capital, seeding the partnership with £403m worth of UK supermarket assets from its existing portfolio. The FTSE 250 company said the assets were transferred at a 3% premium to their 31 December book value, and carried an average net initial yield of 6.6% with a weighted average unexpired lease term of 11 years.

It said it was retaining a 50% stake in the venture, adding that it has received about £200m in net cash proceeds, alongside ongoing management fees and the potential for a performance fee.

The joint venture was intended to scale over time, with a target of up to £1bn in assets, and has been granted a right of first refusal on pipeline opportunities that met its investment criteria.

Supermarket Income REIT expected the transaction to be earnings accretive through capital redeployment, recurring fees, and performance-linked incentives.

The proceeds would be used to reduce debt and reinvest in additional supermarket assets, either directly or through the venture.

Post-completion, the company said it expected to operate at the upper end of its target loan-to-value range of 30% to 40%, including its share of joint venture assets and debt.

"The joint venture with Blue Owl's managed funds brings a high quality, strategic capital partner that shares our conviction in the value of high yielding UK supermarkets," said chief executive officer Robert Abraham.

"With the potential to grow to £1bn over the coming years the joint venture partnership represents Blue Owl's managed funds' first major investment in the UK grocery space and is a strong endorsement of the expertise and track record SUPR has established in this market."

Abraham said that for shareholders, the venture was "another important milestone" in its strategy to recycle capital and grow earnings, and provided a platform for growth with specialist third party capital.

"This follows a period of significant progress on a number of key strategic initiatives set out in November, including renewing the three shortest leases in the portfolio, material cost reductions culminating in the internalisation of the management of the Company and other capital recycling activity."

At 0807 BST, shares in Supermarket Income REIT were up 1.68% at 78.6p.

Reporting by Josh White for Sharecast.com.