Ratings agency Fitch has reaffirmed Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF)’s BBB+ investment-grade rating, citing a stable outlook for the FTSE 250-listed group’s corporate bonds.
Fitch noted that income generated from Supermarket REIT’s portfolio of UK-based supermarkets “is supported by long, mostly inflation-indexed leases, at affordable levels for tenants”.
Furthermore, online fulfilment, despite a post-pandemic dip, “is expected to have positive market penetration growth”.
Supermarket REIT’s successful monetisation of the Sainsbury's Reversion Portfolio (SRP) has notably improved the company's financial profile, aligning with its long-term loan-to-value (LTV) range of 30%-40% while keeping net debt/EBITDA leverage below Fitch's positive rating sensitivity of 8x.
Further justifying the REIT’s investment-grade status, Fitch pointed out its weighted average unexpired lease term (WAULT) to the earliest break of 14 years, with approximately 80% of leases benefitting from inflation-indexed uplifts.
“The essential nature of the grocery business means that the sector has resilient qualities including demand, a characteristic reinforced by the pandemic when supermarkets remained fully open and rent collection for Supermarket REIT was 100%,” said Fitch.