LXi REIT has exchanged contracts to acquire a portfolio of 18 prime grocery store assets predominantly located in Southern England, on a sale and leaseback basis, from British supermarket group Sainsbury’s, for £500 million.
The purchase price equates to a net initial acquisition yield of 5.0 per cent., which is accretive to the company’s portfolio yield of 4.7 per cent, the REIT said in a statement.
The portfolio benefits from defensive characteristics including strong trading performance, low and sustainable rents (averaging £17.25 per sq ft), new 15-year lease terms, five yearly upward only CPI inflation-linked rent reviews (capped at 4 per cent. per annum compounded) and attractive ‘green’ lease provisions.
The portfolio comprises modern buildings all with strong ESG credentials including A or B EPC ratings, on large plots with low site cover, and providing omni-channel sales optionality.
The portfolio has a robust tenant covenant being 100 per cent. let to Sainsbury’s Supermarkets Limited, the main trading company of J Sainsbury plc.
Sainsbury’s is the UK’s second largest grocery retailer, with 14.6 per cent. market share and a market cap of £4.6 billion.
Completion of the acquisition is conditional upon the company raising the necessary equity funding, for which the Company is currently in discussions with investors.
The balance of the purchase price will be funded via a debt facility, which is anticipated to be drawn at an accretive and attractive, low all-in maximum rate of 1.5 per cent. per annum and otherwise on terms in-line with the company’s borrowing policy.