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Supermarket Income REIT and British Airways pension fund join forces for Sainbury's portfolio

The portfolio comprises 26 Sainsbury stores predominately based in London and the south-east

Supermarket Income REIT PLC -

Supermarket Income REIT PLC (LON:SUPR) has joined forces with the British Airways pension fund to buy a 25.5% stake in one of the UK’s largest portfolio of J Sainsbury PLC (LON:SBRY) stores.

The 50:50 joint venture will pay vendor British Land PLC (LON:BLND) £102mln for the stake in the portfolio, which comprises 26 Sainsbury stores predominately based in London and the south-east.

After the transaction, Sainsbury's will own 49% of the freeholds of the properties, insurance group Aviva 25.5% and the JV the remaining 25.5%. 

In a statement, Supermarket Income REIT said it will contribute £51mln as its share of the purchase consideration, noting that the portfolio is currently funded by bonds, which mature in 2023.

“The rental income received from the Portfolio pays down the outstanding balance of the bonds to a final amount which will be repayable in 2023 by way of a refinancing or sale of the portfolio,” it said in the statement.

The REIT noted that the portfolio is a high-quality group of predominantly omnichannel supermarkets with strong property fundamentals. Shareholder returns of higher than its existing annual target of 7%-10% are expected, it added, with the joint venture structure designed to minimise dividend cover dilution.

Nick Hewson, Supermarket Income REIT’s chairman commented: "We are very pleased to have formed a strategic long-term partnership with British Airways Pension Trustees Limited to facilitate this transaction."

"Our investment in this Sainsbury's property portfolio gives us an interest which we believe will be highly NAV accretive over the next three years. We will work closely with the co-owners, Sainsbury's and Aviva, to extend the leases and find a solution to the longer-term ownership of the properties."

Quick facts: Supermarket Income REIT PLC

Price: 109.1 GBX

Market: LSE
Market Cap: £516.72 m

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