Supermarket Income REIT Plc has cashed out of what is described as a highly accretive investment, with Sainsburys agreeing to pay £430.9mln to buy back the investment group’s interests in 21 stores.
The firm, in a stock market statement, said that it had achieved a “highly attractive return” on the investment (it estimates a ‘money-on-money’ multiple of 1.9x, and, an internal rate of return (IRR) of around 30%).
"This investment has been highly accretive for our shareholders and is further evidence of the long-term strength and value of UK grocery property," said Ben Green, director of Atrato Capital, the investment advisor to Supermarket Income REIT.
The deal sees Sainsbury acquire 21 of the 26 properties in Supermarket Income REIT’s ‘Sainsbury’s Reversion Portfolio’ (referred to as its SRP).
It is expected to close on 17 March, 2023, the total cost will be received in three tranches - £279.3mln will be received this Friday, while £116.9mln will be received on 10 July this year.
The final tranche of £34.7mln is conditional on the sale of the remaining five stores in the SRP portfolio.
Proceeds from the sale will be used to reduce Supermarket Income’s existing debt facilities, the REIT said, “further strengthening” its balance sheet.
"We are pleased to have reached a positive outcome to conclude our joint venture and look forward to continuing to work with Supermarket Income REIT in the future,” said Patrick Dunne, director of group property, FM and procurement at Sainsbury’s.
Of the five remaining properties in the SRP portfolio, Sainsbury’s has entered 15-year leases on four of them, with five yearly open market rent reviews and a tenant break option in year 10.
Supermarket Income said it has the option to acquire these four stores under the 15-year leases for a net consideration of £28.3mln, while it expected the one remaining store will be sold at vacant possession value.
In January, the REIT took a larger stake in its SRP by acquiring 25.5% from British Airways Pension Trustees Limited.