Supermarket Income REIT buys additional stake in Sainsbury’s portfolio

Supermarket Income REIT buys additional stake in Sainsbury's portfolio

Supermarket Income REIT has increased its stake in Sainsbury’s Reversion Portfolio to 51% by acquiring British Airways Pension Trustees’ 25.5% beneficial interest for £196 million.

The remaining 49% beneficial interest in the portfolio is held by Sainsbury’s.

In May 2020, the REIT formed a 50:50 joint venture with British Airways Pension Trustees to acquire from British Land a 25.5% stake in the portfolio, one of the UK’s largest portfolios of supermarket properties, for £102 million. Subsequently, in February 2021 the JV acquired a further 25.5% stake in this portfolio from Aviva for £115 million.

The SRP portfolio comprises the freeholds to 26 Sainsbury’s supermarkets of which 21 properties (Option Stores) will be acquired by Sainsbury’s for £1,040 million in two tranches in March 2023 and July 2023.

Beneficial ownership of the five remaining stores is held between the company and Sainsbury’s in the same proportions as the beneficial interests. Sainsbury’s has entered into new 15-year leases on four of these stores with five yearly open market rent reviews and a tenant break option at year 10. It is expected that the one store that has not been regeared will be sold at vacant possession value.

As a result of Sainsbury’s purchasing the Option Stores, the company will receive a minimum of £380 million in cash from Sainsbury’s in two tranches, £264 million in March 2023 and £116 million in July 2023.

The acquisition of British Airways Pension Trustees’ beneficial interest also gives the company a 51% stake in this strategically important transaction with Sainsbury’s.

The acquisition has been funded entirely by a new debt facility provided by JPMorgan Chase Bank. The facility has no recourse to any of SUPR’s assets other than its interest in the SRP Portfolio. The facility has a margin of 1.5% over SONIA and an arrangement fee of 2.0%.

The facility will be repaid in full following receipt of the first payment from Sainsbury’s in March 2023.