Supermarket Income REIT has acquired a further 25.5% stake in a portfolio of Sainsbury’s supermarkets for £196m, resulting in its ownership of the joint venture increasing to 51%.
The company bought the stake in the joint venture portfolio of 26 stores from British Airways Pension Trustees Limited. The remaining 49% interest in the portfolio is held by Sainsbury’s plc.
The ownership structure of the portfolio will contractually unwind in March 2023 and July 2023, when Sainsbury’s will acquire 21 of the stores for £1.04bn. Supermarket Income REIT will receive a minimum of £380m in cash from Sainsbury’s in two tranches for the sale of the 21 stores, £264m in March 2023 and £116m in July 2023.
The five remaining stores will be held between Supermarket Income REIT and Sainsbury’s in the same proportions as previously. Sainsbury’s has entered into new 15-year leases on four of these stores with five yearly open market rent reviews and a tenant break option at year 10. It is expected that the one store that has not been regeared will be sold at vacant possession value.
The company’s investment in the portfolio has produced an estimated money-on-money multiple of 1.9x and an IRR of 26%, representing 8 pence per share in EPRA NTA growth.
Financing
The acquisition of the 25.5% stake has been funded entirely by a new debt facility with JPMorgan Chase Bank. The facility has no recourse to any of the group’s assets other than its interest in the portfolio. The facility has a margin of 1.5% over SONIA and an arrangement fee of 2.0%.
The facility will be repaid in full following receipt of the first payment from Sainsbury’s in March 2023.
Based on the company’s last published property portfolio valuation as at 30 June 2022, the pro forma loan-to-value ratio (LTV) following the acquisition is 39% (from 36% pre-transaction). The LTV is expected to decline to 31% following the repayment of the facility in March 2023 and to 26% in July 2023 following receipt of the second tranche of proceeds from Sainsbury’s.
SUPR : Supermarket Income REIT acquires £196m stake in Sainsbury’s portfolio