Outperforming UK grocery-focused investment trust, Supermarket Income REIT, has announced a £75 mln (€85 mln) placing as it seeks to close on two additional supermarket properties.
The trust, which currently holds 10 supermarket assets let to Tesco, Sainsbury’s and Morrisons, focuses on the UK’s ‘big four’ grocery chains, preferring sizeable, well-located sites suited to omnichannel operations.
According to today’s announcement, the £75 mln placing at a price of 103p represents a discount of 5.7% to the stock’s last close price of 109p, and a 6.2% premium to the last reported net asset value (NAV) of 97p.
Supermarket Income plans to use the proceeds of the raise to acquire assets from its near-term pipeline, which currently comprises two supermarket properties available for a cost of £115 mln.
These assets are trading at a net investment yield of 5.0%, in line with the trust’s existing portfolio. The firm also said that the properties meet its strict acquisition criteria of inflation-linked leases, long weighted average unexpired lease terms (19 years), low-site coverage, online ready stores (click and collect/delivery) and were both regionally important stores for the operators.
UK supermarket properties have been performing strongly in uncertain market conditions, leading the country’s retail sector for total returns over the last 12 months. Across Europe, Supermarket Income has been one of the few retail REITs to announce it would be paying its quarterly dividend after receiving 100% of its rent from tenants across its assets.
In terms of valuations, a significant yield premium now exists between supermarket property, and the yield on the operators’ corporate bonds, despite the historical trend of close correlation, Supermarket Income said.
‘The availability of long-dated, inflation linked, secure income from supermarket properties set it apart from the wider sector in a retail market that is becoming increasingly difficult to navigate,’ noted property analyst Goodbody, which is acting on Supermarket Income’s behalf for the raise.