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Supermarket Income REIT raises funds as it targets four more acquisitions

Last updated: 11:11 04 Mar 2021 GMT, First published: 07:31 04 Mar 2021 GMT

Supermarket Income REIT PLC -

Supermarket Income REIT PLC (LON:SUPR) has announced plans to raise around £100mln by placing shares at 106p each (versus last night’s closing price of 109.5p).

Retail investors will be able to participate in the fundraising via the PrimaryBid platform. The PrimaryBid offer will close at 11am on March 18 or earlier if it is oversubscribed. There is a minimum subscription of £1,000 per investor.

The funds raised have been earmarked for a number of attractive acquisition opportunities.

The REIT said its investment adviser has identified four assets with an aggregate value of around £230mln and the company is negotiating to buy these.

Meanwhile, coming down the pipeline are nine more assets with an aggregate value of around £184mln that meet the company’s acquisition criteria.

"Omni-channel supermarket property has proven to be highly robust as demonstrated by our 100% rent collection in 2020 and growing investor interest in the grocery property sector. Since its IPO in 2017, the company has carefully grown its investment portfolio to over £1 billion through accretive and selective acquisitions, whilst delivering investors a stable and growing income return,” said Nick Hewson, the chairman of the company.

"With an attractive pipeline of assets in place, this fundraise will enable the company to continue to execute on a number of transactions that meet our stringent criteria, building on its strong track record by investing in additional key omni-channel properties let to some of the UK's largest supermarket operators," he added.

In a separate announcement, the property company said it has acquired a Tesco supermarket in Prestatyn, North Wales.

The property has been bought from Ediston Property Investment Company for £26.5mln (excluding acquisition costs) representing a net initial yield of 5.3%.

The supermarket is being acquired with an unexpired lease term of 12 years, with five-yearly, upwards only, retail price index-linked rent reviews (subject to a 5.0% cap and a 1.0% floor). The store forms a key part of Tesco's online grocery fulfilment network in the region, the real estate investment trust (REIT) said.

"This omni-channel Tesco has attractive lease terms and strong trading fundamentals. The acquisition is our first in Wales, providing further geographic diversification to our existing portfolio," said Ben Green, director of Atrato Capital, the investment adviser to Supermarket Income REIT.In a separate announcement, the REIT

Peel Hunt said the acquisition completed the deployment of October’s £200mln fundraising, and takes the pro-forma loan-to-value (LTV) percentage to 44%, which is a bit above the medium-term target of an LTV of 30-40%, hence today’s announcement of a share placing.

The issue price of 107p represents a 2% premium to the EPRA net tangible assets-based net asset value (NAV).

“We expect no meaningful impact on NAV –the small premium will offset the issue costs. We estimate LTV will reduce to c. 34% immediately following the raise,” the broker said.

“We estimate the initial EPS [earnings per share] dilution will be c. 10% on an annualised basis (before any of the proceeds are deployed). Adjusting the company’s run-rate earnings estimates that were disclosed in yesterday’s results, we estimate that dividend cover immediately following the raise will be c. 110% if JV [joint venture] income is included or c. 85-90% if it is excluded,” I added.

The broker, which rates the REIT’s shares a buy, said the company has a good track record of deploying capital into accretive acquisitions and it is confident deployment of the funds it raises this month will be rapid.

Shares in Supermarket Income REIT were down 1.8% at 107.5p versus Peel Hunt’s 12-month target price of 125p.

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