Supermarket Income REIT has acquired nine Carrefour supermarkets in France for €36.7m and sold a Tesco store for £63.5m.
Carrefour acquisitions
The company has completed the acquisition of a portfolio of a further nine omnichannel Carrefour supermarkets in France. The stores were acquired through a direct sale and leaseback transaction with Carrefour, for a total purchase price of €36.7m (excluding acquisition costs), at a portfolio net initial yield of 6.8%. The company now has 26 Carrefour stores in France, representing around 5% of its gross assets.
The acquisition was financed through a private placement with an institutional investor for €39m of new senior unsecured notes. The notes have a maturity of seven years and a fixed rate coupon of 4.1%.
The nine stores, which have an average gross internal area of 40,000 sq ft per store, operate under the Carrefour Market brand and are all well established with long trading histories and low competition in their catchment areas. These omnichannel supermarkets form part of Carrefour’s “Drive” online grocery fulfilment network.
The portfolio has been acquired on a weighted average lease term of 12 years (with a tenant-only break option in year 10), subject to annual uncapped inflation-linked rent reviews.
Tesco sale
The company has also completed the sale of Tesco, Newmarket to its operator, Tesco plc, for £63.5m. The sale was completed at a 7.4% premium to the 30 June 2024 valuation. The company said that the sale underlined the strategic importance of the company’s assets to the supermarket operators. The passing rent of the store upon disposal was £3.5m.
In recycling the proceeds, the board said that it would consider options to create accretive value for shareholders through individual asset sales and potential joint ventures.
Debt position
Following the placement of the notes and receipt of proceeds from the sale of Tesco, Newmarket, the company has a pro-forma LTV of 38%.
Lease renewals
The company also announced that it had completed three lease renewals on Tesco stores located in Bracknell, Bristol and Thetford, which were the three shortest leased Tesco stores in its portfolio. The leases were renewed at an average 4% rent to turnover and 13% above the company’s valuer’s estimated rental values (as at 30 June 2024).
The leases have been extended to 15 years with annual RPI-linked rent reviews (subject to a 4% cap and a 0% floor). The regeared stores are expected to benefit from a capital value growth which will be fully reflected in the 30 June 2025 valuation.
The company’s WAULT has increased from 11 years to 12 years, and the next material lease expiry is not until 2032.
Nick Hewson, chair of Supermarket Income REIT, commented:
“We have made significant progress on the portfolio initiatives that we set out in November 2024, which together are intended to support our earnings growth. These transactions highlight the inherent value of the portfolio, the importance of these stores for the grocery operators and our ability to crystalise value as part of our capital recycling strategy. We remain focused on continuing to make good progress with our remaining strategic initiatives, including delivering further cost savings for the Company, and we look forward to updating the market in due course.”
