Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF) is deepening its partnership with Blue Owl Capital after its joint venture agreed to buy 10 Asda supermarkets for £196 million and lined up a further £232 million of assets to be folded into the structure by the end of the year.
SUPR, which invests in grocery stores let on long leases, will contribute £98 million to the Asda acquisition in line with its 50% stake in the venture.
The stores were selected from an initial pool of 20 and come with new 25-year leases, annual rent reviews linked to the Consumer Prices Index, and what the company describes as low passing rents of about £19.90 per square foot.
All are large-format supermarkets, averaging 78,000 sq. ft., which support both in-store and online operations, including home delivery and Click & Collect.
The joint venture, originally assembled with a £403 million seed portfolio, will grow to £833 million of assets once the transactions complete.
SUPR said the Asda sites sit in strong catchment areas and have undergone detailed analysis at the store and operator level.
The company also highlighted the alternative use potential of each site, a factor often watched closely by property investors as it can help underpin long-term valuations.
Alongside the Asda deal, SUPR has agreed terms to transfer five of its own supermarkets into the joint venture at a valuation of £232 million, which is 3% above the book value recorded at the end of June.
SUPR will retain an effective 50% interest in those assets through its JV stake and will earn a 0.6% annual management fee on Blue Owl’s share, adding to the income it already receives for running the seed portfolio.
It said the moves are consistent with its plan to recycle capital into higher-yielding stores while exiting lower-yielding sites.
On completion, the company expects its weighted average unexpired lease term to increase by 0.7 years to 12 years and its exposure to investment-grade tenants to rise to 74% of rent.
Exposure to Asda will be 8%. Pro-forma loan-to-value is expected to be 40%.
The group has roughly £100 million of additional assets under exclusivity and hopes to close those deals before the end of the year.
Rob Abraham, SUPR’s chief executive, said: “These transactions further demonstrate our ability to deliver on our strategy, as we continue to successfully drive returns for our shareholders.
"Working closely with Blue Owl, we are pleased to have increased the scale of the JV through the addition of these top-quartile Asda stores and the expected transfer of five of SUPR’s existing stores.
"Looking ahead, we have further financing capacity to scale both our business and the JV portfolio.”