SALE OF SAINSBURY’S REVERSION PORTFOLIO INTEREST

Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust providing secure, inflation-linked, long income from grocery property in the UK, announces the exchange of contracts for the sale of its interest in the Sainsbury’s Reversion Portfolio (the “SRP Portfolio”) to Sainsbury’s for a total gross consideration of £430.9 million (excluding costs).

VIDEO: Supermarket Income REIT

The sale completes the previously announced acquisition by Sainsbury’s of 21 of the 26 SRP Portfolio properties and concludes the contractual unwind of the SRP Portfolio structure (see further information below).

The transaction is expected to close on 17 March 2023 with the £430.9 million consideration received in three tranches. £279.3 million will be received on 17 March 2023 and £116.9 million on 10 July 2023. The third tranche of £34.7 million 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 ten. Following completion of the transaction, SUPR has an option to acquire these four stores benefitting from the new Sainsbury’s 15-year leases for a net consideration of £28.3 million (net of SUPR’s existing interest and excluding acquisition costs). It is expected that the one remaining store will be sold at vacant possession value.

SUPR’s investment in the SRP Portfolio has generated a highly attractive return for shareholders and following this transaction, it is estimated that the investment will have provided a money-on-money multiple of 1.9x and an IRR of 30%1.

Use of proceeds

The net proceeds are expected to be used to reduce the Company’s existing debt facilities, further strengthening the Company’s balance sheet. Based on the Company’s last published portfolio valuation as at 31 December 2022, the Company’s LTV is expected to decline to c.34.4% in March 2023 and c.29.7% in July 2023 following receipt of the first two tranches of the consideration2.

Ben Green, Director of Atrato Capital Limited, the Investment Adviser to Supermarket Income REIT plc, 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.”

Patrick Dunne, Director of Group Property, FM & Procurement at Sainsbury’s, commented:

“We are pleased to have reached a positive outcome to conclude our joint venture and look forward to continuing to work with Supermarket Income REIT in the future.”

Below is a video, shot with the investment team of Atrato Group, the advisors behind SUPR, highlighting the Group’s investment strategy