Supermarket Income REIT acquires three grocery stores for 98 million pounds

Supermarket Income REIT PLC has completed the acquisition of three long-let grocery stores across the United Kingdom for a total consideration of £97.6 million. The properties are occupied by Tesco, Sainsbury’s and Waitrose under established lease arrangements.

The acquisitions deliver an average net initial yield of 5.5 per cent, providing the listed property group with income returns from the outset. The metric represents the annual rental income as a proportion of the purchase price and serves as a key measure of investment performance in the commercial property sector.

The largest transaction involves a Tesco supermarket in Aylesbury, purchased for £56.3 million. The property comprises 110,000 square feet of retail space situated on an 11.2-acre site, complete with a petrol filling station, Click and Collect facilities and home delivery operations. Tesco has maintained a trading presence at the location for over 40 years, with 11 years remaining on the current lease term.

The lease structure is configured as a triple-net arrangement, placing responsibility for property maintenance, insurance and related costs on the tenant rather than the landlord. Rent reviews are conducted annually in line with the Retail Prices Index, subject to a cap of 3 per cent and a floor of 1 per cent.

The second acquisition comprises a Sainsbury’s store in Sale, Greater Manchester, secured through an off-market transaction for £33.8 million. The property yields 5.9 per cent and extends to 60,000 square feet. The supermarket has been operational for 29 years and retains 16 years on its lease, with annual inflation-linked rent reviews capped at 4 per cent.

The third property is a Waitrose store in Frimley, Surrey, acquired for £7.6 million at a net initial yield of 6.2 per cent. The store has traded for more than 25 years and has 11 years remaining on its lease term. Rent reviews are scheduled every five years and are linked to the Consumer Price Index.

The properties represent long-established trading locations, a criterion that aligns with the investment strategy of Supermarket Income REIT, which focuses on grocery stores with stable customer footfall and extended lease durations. Each of the three supermarkets benefits from established operational histories and secure tenant covenants.

Funding for the acquisitions was provided through drawdowns on existing debt facilities. Following completion of additional transactions currently in the pipeline, the group anticipates that its loan-to-value ratio will stand at approximately 43 per cent. The metric measures the proportion of debt relative to the value of the property portfolio and is a standard indicator of leverage in the real estate investment trust sector.

The weighted average unexpired lease term across the portfolio is expected to reach 12 years following completion of the outstanding transactions. The group also noted that exposure to investment-grade tenants will increase to 75 per cent, reflecting the high credit quality of the major UK grocery retailers that occupy its properties.

Rob Abraham, chief executive of Supermarket Income REIT, described the acquisitions as the culmination of a transformational year for the business. He highlighted the delivery of key strategic objectives including lease renewals, the internalisation of management functions, the debut issuance of corporate bonds and changes to the company’s stock exchange listing.

Abraham stated that the group is on track to have recycled approximately £400 million of capital during the year into acquisitions sourced from various channels within its earnings-accretive pipeline. The capital recycling strategy involves the sale of selected assets and the redeployment of proceeds into new investments offering superior returns or improved structural characteristics.

Supermarket Income REIT positions itself as a specialist landlord to the grocery sector, benefiting from long-term lease arrangements and inflation-linked rent provisions at a time when supermarkets continue to represent an essential component of consumer spending patterns. The investment model is predicated on the resilience of food retail and the structural demand for well-located grocery stores.