Supermarket income REIT makes £222M in new investments

Specifically, the company has completed the acquisition of six properties with a total value of £104 million, following the announcement in July of the acquisition of a further three supermarkets for £118 million. As a result, SUPR has completed £222 million of new investments within just two months.

The nine properties were acquired at an average net initial yield of 6.6%, while the weighted average unexpired lease term (WAULT) stands at 10 years, providing significant visibility over future rental income.

Portfolio Diversification

The latest acquisitions significantly broaden SUPR’s investment profile, which has historically focused primarily on large-format, omnichannel supermarkets. The expanded portfolio adds exposure to food distribution centres, convenience stores and food-anchored retail parks, further diversifying the company’s investments.

The six newly acquired properties comprise:

• A Sainsbury’s supermarket in Macclesfield;
• A Morrisons store in Leeds;
• A retail park in Nottinghamshire, anchored by M&S;
• A Co-op convenience store in Birmingham;
• An M&S-anchored property in Glasgow; and
• A Sainsbury’s food distribution centre in Avonmouth.
• Long-Term Leases
• Particular interest lies in the two large-format traditional supermarkets within the new portfolio, both of which benefit from long remaining lease terms.

The 74,000 sq ft Sainsbury’s store in Macclesfield and the 80,000 sq ft Morrisons store in Leeds each have 13 years of remaining lease term.

The Sainsbury’s distribution centre in Avonmouth has an even longer remaining lease term of 14 years.

The leases also incorporate mechanisms for rental increases. The Sainsbury’s property in Macclesfield provides for annual rent reviews linked to the Retail Price Index (RPI), subject to a floor of 2% and a cap of 4%. At the Morrisons property in Leeds, rent reviews take place every five years and are also linked to RPI.

For the Sainsbury’s distribution centre, five-year rent reviews are based on market rental values, which, according to SUPR, provide potential for further income growth through the alignment of rents with prevailing market levels.

From Supermarkets to Grocery-Related Assets

SUPR’s investment strategy is therefore taking on a broader dimension, as the company is no longer focused exclusively on large-format omnichannel supermarkets.

A notable example is the retail park in Nottinghamshire, which is fully let and accommodates occupiers including M&S, B&Q, Costa, Greggs and Mountain Warehouse.

Meanwhile, the Birmingham acquisition comprises a 4,000 sq ft Co-op convenience store, adding another property type to the portfolio.

Rapid Deployment of Capital

The speed with which SUPR has deployed the proceeds of its equity raise is another key element of its strategy.

The company raised £100 million of new capital in July and, combined with debt financing, completed the relevant investments within just two months.

With total investments of £222 million, SUPR is strengthening its presence in real estate linked to everyday consumer spending, while broadening its income sources and maintaining a focus on long-term, stable income returns.