Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF), the listed property group that owns supermarket buildings and leases them back to grocers, has completed the £97.6 million purchase of three UK stores let to Tesco, Sainsbury’s and Waitrose.
It said the deals deliver an average net initial yield of 5.5%. That figure is a property industry measure of the cash return from rent in the first year, expressed as a percentage of the purchase price.
The largest acquisition is a Tesco in Aylesbury, bought for £56.3 million. The 110,000 sq ft store sits on an 11.2-acre site with a petrol station, Click & Collect and a home delivery operation. Tesco has traded there for more than 40 years and has 11 years left on its lease.
The store is let on a triple-net lease, meaning the tenant rather than the landlord pays most property costs such as maintenance and insurance. The rent rises annually in line with inflation, measured by the retail prices index, subject to a cap of 3% and a floor of 1%.
The second purchase is an off-market deal for a Sainsbury’s in Sale, Greater Manchester, costing £33.8 million and yielding 5.9%. The 60,000 sq ft supermarket has been trading for 29 years and has 16 years left on its lease, with annual inflation-linked rent reviews capped at 4%.
The third is a smaller Waitrose in Frimley, Surrey, acquired for £7.6 million at a 6.2% yield. The store has been operating for more than 25 years and has 11 years left on its lease, with rents reviewed every five years in line with consumer price inflation.
All three supermarkets are long-established trading locations, a key attraction for the landlord, which focuses on grocery stores with stable footfall and long leases.
The acquisitions were funded by drawing down existing debt. After completing other transactions already in its pipeline, the group expects its loan-to-value ratio (the proportion of debt compared with the value of its properties) to be about 43%.
The average unexpired lease length across the portfolio, known as the WAULT, is expected to be 12 years.
Supermarket Income REIT said exposure to investment-grade tenants will rise to 75%, reflecting the high credit quality of major UK grocers.
Rob Abraham, chief executive, said the purchases capped what he described as “a transformational year” for the business.
“The acquisitions come at the end of a transformational year for SUPR, where we delivered on key strategic objectives, including lease renewals, internalisation, our debut bond issuance and changes to our listing,” he said.
He added: “We are on track to have recycled approximately £400 million of capital this year into an exciting range of acquisitions across the various channels in our earnings accretive pipeline.”
The company positions itself as a specialist landlord to supermarkets, benefiting from long leases and inflation-linked rents at a time when grocery stores remain a central part of everyday spending.