Supermarket Income REIT has entered into a £1bn strategic supermarket joint venture with funds managed by US alternative asset manager Blue Owl Capital.
The JV has been seeded with eight high yielding, omni-channel supermarket assets from the REIT’s existing portfolio, which have been transferred into the JV at a 3% premium to book value, as at 31 December 2024.
The portfolio, which comprises five Tesco supermarkets, two Sainsbury’s and a Morrisons, has a combined value of £403m, an average net initial yield of 6.6% and a WAULT of 11 years.
Supermarket Income REIT will retain a 50% stake in the JV and receive a net cash consideration of circa £200m for the portfolio. It will also receive a management fee of 0.6% per annum of the gross asset value for the ongoing management of Blue Owl’s interest in the JV.
The JV is seeking to acquire additional high yielding supermarket assets, with a view to growing the assets of the JV to up to £1bn over the coming years.
Supermarket Income REIT will use the proceeds from the JV to reduce debt in the near term and to invest in other supermarkets, either directly or indirectly through the JV.
Robert Abraham, CEO of Supermarket Income REIT, said: “The JV with Blue Owl’s managed funds brings a high quality, strategic capital partner that shares our conviction in the value of high yielding UK supermarkets. With the potential to grow to £1bn over the coming years the JV partnership represents Blue Owl’s managed funds’ first major investment in the UK grocery space and is a strong endorsement of the expertise and track record SUPR has established in this market.
“For our shareholders, the JV is another important milestone in our strategy to recycle capital and grow earnings, and provides a platform for growth with specialist third party capital. This follows a period of significant progress on a number of key strategic initiatives set out in November 2024, including renewing the three shortest leases in the portfolio, material cost reductions culminating in the internalisation of the management of the company and other capital recycling activity.”
Marc Zahr, co-president and global head of real assets at Blue Owl, added: “SUPR is the leading UK grocery real estate investor, and we view them as the right counterparty as we execute on our first major transaction in the UK grocery sector. We see an opportunity to generate attractive returns from these assets, which are underpinned by the growing and highly resilient UK grocery sector. We look forward to working with SUPR to grow the JV, as we execute on an attractive pipeline of UK assets.”
