Supermarket Income REIT sells Tesco site, expands French portfolio

(Sharecast News) - Supermarket Income REIT updated the market on a number of key portfolio initiatives on Monday, aimed at driving earnings accretion through strategic capital recycling. The FTSE 250 real estate investment trust announced the completion of the sale of its Tesco property in Newmarket to Tesco itself, for £63.5m, transacting at a 7.4% premium to its 30 June 2024 valuation with a passing rent of £3.5m.

In addition to the property sale, the firm said it had successfully renewed leases on its Tesco stores in Bracknell, Bristol, and Thetford.

The renewals were secured at an average 4% rent-to-turnover - 35% above the MSCI supermarket benchmark and 13% above the valuer's estimated rental levels - and extended the leases for 15 years with annual RPI-linked rent reviews subject to a 4% cap and 0% floor.

Supermarket Income said the initiative had increased its weighted average unexpired lease term from 11 to 12 years, with the next significant lease expiry not due until 2032.

The company added that it further bolstered its portfolio through the acquisition of nine omnichannel Carrefour supermarkets in France via a direct sale and leaseback transaction.

Acquired for a total of €36.7m at a net initial yield of 6.8%, the stores - operating under the Carrefour Market brand and averaging approximately 40,000 square feet each - expanded the REIT's French portfolio to 26 properties, representing roughly 5% of its gross assets.

The acquisition was financed through a private placement of €39m in new senior unsecured notes with a seven-year maturity and a fixed coupon of 4.1%, resulting in a pro-forma loan-to-value ratio of 38% when combined with the proceeds from the Tesco sale.

"We have made significant progress on the portfolio initiatives that we set out in November, which together are intended to support our earnings growth," said chair Nick Hewson.

"These transactions highlight the inherent value of the portfolio, the importance of these stores for the grocery operators and our ability to crystallise 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."

At 1016 GMT, shares in Supermarket Income REIT were up 2.07% at 72.27p.

Reporting by Josh White for Sharecast.com.