Supermarket Income REIT PLC's (LSE:SUPR, OTC:SUPIF) first foray into Europe via the €75.3 million purchase of 17 Carrefour stores drew some interesting analysis from the investment community.
"Today's acquisition is in line with the previously announced policy of making income-accretive acquisitions whilst maintaining a robust balance sheet," said American bank Stifel, repeating its 'buy' advice.
Peel Hunt said the net initial yield compared "favourably" to the REIT's existing portfolio at 6.3%, "but we note that the last UK purchase was at a higher yield of 7.5%". It went on to point out that the property company trades on a 16% discount to net asset value and offers a dividend yield of 8.3%.
Investors were told the weighted average lease term is 12 years, featuring a tenant-only break option in the tenth year. Each lease includes provisions for annual uncapped inflation-linked rent reviews, securing the REIT's income against inflation fluctuations.
To finance this significant acquisition, Supermarket Income REIT has used €81.7 million from its existing revolving credit facility with HSBC.
The borrowing costs for this new Euro-denominated loan are set at 1.7% over EURIBOR.
Post-acquisition, the company's pro-forma net loan-to-value (LTV) ratio stands at 37%, emphasizing a stable financial positioning while leveraging attractive long-term borrowing costs.
Liberum ('hold' with a target of 78p) provided this insight: "The cost of this new Euro-denominated borrowing is 1.7% over EURIBOR (c. 5.5%) which will take the total LTV to 37%.
"In our view, this spread above the cost of debt seems insufficient to compensate [the company's] equity holders."