Supermarket Income REIT has exchanged contracts for the sale of its interest in a portfolio of Sainsbury’s let supermarkets to Sainsbury’s for a total of £430.9m.
As previously announced, Sainsbury’s has acquired 21 of the 26 stores in the Sainsbury’s Reversion Portfolio (SRP), concluding the contractual unwind of the SRP Portfolio structure.
The transaction is expected to close on 17 March 2023 with the £430.9m consideration received in three tranches (£279.3m will be received on 17 March 2023 and £116.9m on 10 July 2023. The third tranche of £34.7m is conditional on the sale of the remaining five stores in the SRP Portfolio).
Sainsbury’s has entered into new 15-year leases on four of the five remaining stores, with five yearly open market rent reviews and a tenant break option in year 10. Following completion of the transaction, Supermarket Income REIT has an option to acquire these four stores benefitting from the new Sainsbury’s 15-year leases for a net consideration of £28.3m (net of SUPR’s existing interest). It is expected that the one remaining store will be sold at vacant possession value.
The company’s investment in the SRP Portfolio is estimated to have provided an IRR of 30%.
The net proceeds are expected to be used to reduce the company’s existing debt facilities. Based on the last published portfolio valuation as at 31 December 2022, the company’s LTV is expected to fall to 34.4% in March 2023 and 29.7% in July 2023 following receipt of the first two tranches of the consideration.
Ben Green, director of Atrato Capital Limited, the investment adviser to Supermarket Income REIT, said: “This investment has been highly accretive for our shareholders and is further evidence of the long-term strength and value of UK grocery property.”
SUPR : Supermarket Income REIT sells Sainsbury’s portfolio for £430m