Supermarket Income Reit has made its first overseas foray after agreeing to purchase a portfolio Carrefour supermarkets located in France.
In a sale and leaseback, the real estate investment trust acquired 17 “strongly performing omnichannel” grocery stores for €75.3 million. This represents a net yield of 6.3%.
The stores are “long-established and successful” and occupy an average of 40,000 square feet. Carrefour operates in 30 countries and generated sales of €94billion in 2023. It has the second-largest market share in France.
The portfolio was acquired with an average weighted lease term of 12 year with a break-option in the 10th year and annual rent reviews that are inflation linked.
Ben Green, director of Atrato Capital and investment advisor for Supermarket Income Reit, said, “This accretive deal is complementary to our portfolio, providing tenant diversification. It also continues our strategy to invest in the future of grocery.”
Andrew Saunders of Shore Capital said that the deal represented “an attractive chance to secure a large block of stores with one transaction”, and Peel Hunt stated that the acquisition “benefits a greater yield on spread in the UK, which should improve earnings”.
The property investor was able to increase the rent it collected by £104.7million in the six-month period to the end December.
The company’s portfolio of 73 stores is worth more than £1.7billion. The company focuses on large stores located on the outskirts of towns, which are also used to collect click-and-collect items or deliver online. 93 percent of its stores offer one or both of these services.
Tesco and Sainsbury’s are Britain’s largest supermarket chains. They contributed to the operating income rising by 18% to £45million in the first half.
The FTSE 250 company gained 44 percent of the market during the same period. Aldi, a discount competitor that operates smaller stores, slowed its expansion rates last year.
The market is more active than usual. A record £2.1 billion will be invested in British supermarket properties in 2023. Asda, Morrisons, and other private equity-backed chains are looking to free up cash by leasing back stores they have sold their stores. Sainsbury’s, Tesco, and other supermarkets have also been trying to buy their supermarkets back due to their stronger positions.
Shares of Supermarket Income REIT are down nearly 15% since last year at this time, but closed last night up 1/4p or 0.3 percent, closing at 73p.