Supermarket Income REIT acquires Sainsbury's in Huddersfield

18th Nov 2024 10:34

(Sharecast News) - Supermarket Income REIT has acquired a Sainsbury's omnichannel supermarket in Huddersfield for £49.7m, it announced on Monday, representing a net initial yield of 7.6%.

The FTSE 250 real estate investment trust said the acquisition included a 113,348 square foot store with a petrol station on an 8.5-acre site, where Sainsbury's had operated for over 30 years.

It said the store serves as an online fulfilment hub with home delivery and click and collect services.

The unexpired lease term of 11 years featured annual RPI-linked rent reviews capped at 4%.

Supermarket Income financed the acquisition through its existing debt facility, increasing its loan-to-value ratio to 39% and extending its portfolio weighted average unexpired lease term (WAULT) to 12 years.

The company said the purchase aligned with its strategy of increasing rental income from investment-grade tenants while supporting progressive dividend growth through accretive acquisitions, capital recycling, and cost savings.

Additionally, the company announced several strategic updates.

It said it was planning to revise its management fee calculation to align with market capitalisation, which was expected to reduce costs and boost earnings from the 2025-2026 financial year.

The company said it was also seeking shareholder approval to amend its investment policy to pursue opportunities in European markets, building on its initial investment in France.

Supermarket Income REIT said it was exploring asset sales and joint ventures to recycle capital into higher-yielding opportunities, reduce debt, or execute share buybacks.

Plans were also underway to extend shorter leases to solidify tenant commitments, while it continued preparations for a secondary listing on the Johannesburg Stock Exchange.

With £75m in undrawn debt facility headroom and over 90% of its debt fixed at an average rate of 4%, Supermarket Income said it remained well-positioned to navigate market conditions while supporting its growth and dividend objectives.

"The team has been, and remains, incredibly active across a range of strategic and operational developments, all driven by our focus on delivering value for shareholders," said Ben Green, principal of the company's investment adviser, Atrato Capital.

"We are pleased that shareholders will have the ability to vote on two proposals - to make further improvements to the cost base and to provide greater flexibility for accretive acquisitions - at the upcoming AGM.

"We are also very pleased to announce this UK acquisition - we remain highly focused on driving returns and we continue to explore all avenues to deliver value for shareholders of Supermarket Income REIT."

At 1014 GMT, shares in Supermarket Income REIT were up 0.17% at 68.61p.

Reporting by Josh White for Sharecast.com.