Supermarket Income REIT has exchanged contracts to sell its interest in the Sainsbury’s Reversion Portfolio (SRP Portfolio) to Sainsbury’s for £430.9 million.
The sale completes the previously announced acquisition by Sainsbury’s of 21 of the 26 SRP Portfolio properties and concludes the contractual unwind of the SRP Portfolio structure, the REIT said.
In May 2020, the company formed a 50:50 joint venture with British Airways Pension Trustees Limited (BAPTL) to acquire from British Land Plc a 25.5% stake in the SRP 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.
On 12 January 2023 the company announced that it had acquired BAPTL’s 25.5% beneficial interest in the SRP Portfolio for £196 million, resulting in the company’s beneficial interest in the SRP Portfolio increasing to 51.0%.
The transaction is expected to close on 17 March 2023 with the £430.9 million consideration received in three tranches. £279.3 million will be received on 17 March 2023 and £116.9 million on 10 July 2023. The third tranche of £34.7 million is conditional on the sale of the remaining five stores in the SRP Portfolio.
Sainsbury’s has entered into new 15-year leases on four of the five remaining stores, with five yearly open market rent reviews and a tenant break option in year ten. Following completion of the transaction, SUPR has an option to acquire these four stores benefitting from the new Sainsbury’s 15-year leases for a net consideration of £28.3 million. It is expected that the one remaining store will be sold at vacant possession value.
According to the company, SUPR’s investment in the SRP Portfolio has generated a highly attractive return for shareholders and following this transaction, it is estimated that the investment will have provided a money-on-money multiple of 1.9x and an IRR of 30%.
”The net proceeds are expected to be used to reduce the company’s existing debt facilities, further strengthening the Company’s balance sheet. Based on the company’s last published portfolio valuation as at 31 December 2022, the company’s LTV is expected to decline to c.34.4% in March 2023 and c.29.7% in July 2023 following receipt of the first two tranches of the consideration.”
Ben Green, Director of Atrato Capital Limited, the Investment Adviser to Supermarket Income REIT plc, said: ”This investment has been highly accretive for our shareholders and is further evidence of the long-term strength and value of UK grocery property.”
Patrick Dunne, Director of Group Property, FM & Procurement at Sainsbury’s, commented: “We are pleased to have reached a positive outcome to conclude our joint venture and look forward to continuing to work with Supermarket Income REIT in the future.”