Supermarket Income REIT, the UK supermarket real estate investment trust, has acquired the Tesco Extra in Newmarket, Suffolk, from Standard Life Pooled Pension Property Fund for £61.0 million (excluding acquisition costs), reflecting a net initial yield of 4.6%.
Tesco has a long history of trading from this prominent 9-acre site which was originally developed in the 1980s and completely rebuilt in 2016.
The site comprises a 68,000 sq ft net sales area Tesco Extra with a 12-pump petrol filling station, 654 parking spaces and purpose-built online fulfilment distribution docks, supporting Tesco’s online grocery business across the region. It is being acquired with an unexpired lease term of 16 years with annual, upward-only, RPI-linked rent reviews (subject to a 5% cap and 0% floor).
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The company has also arranged a new revolving credit facility (RCF) of £60.0 million with Wells Fargo. This secured, interest-only, RCF has an initial five-year term and two further one-year extension options. Once drawn, the RCF has a margin of 2.0% above 3-month Libor which is currently equivalent to a total cost of c.2.1%. The RCF also includes a £100 million uncommitted accordion option, exercisable at any time over the term of the facility.
“This modern Tesco Extra is a great addition to our growing portfolio of omnichannel stores. The property has attractive lease terms, strong fundamentals and is a key online grocery fulfilment hub for Tesco supporting both home delivery and click and collect. We are also delighted to have secured Wells Fargo as a new lender to Supermarket Income REIT. Our new facility provides us with very competitively priced, seven-year funding with room to grow to support the Company’s future investment requirements, said Ben Green Director of Atrato Capital, the Investment Adviser to Supermarket Income REIT.