Supermarket Income REIT (SUPR) has exchanged contracts for the sale of its interest in the Sainsbury’s Reversion Portfolio (SRP) to Sainsbury’s for a total gross consideration of £430.9m.
The SRP was created in 2000 through two sale and leaseback transactions and in May 2020 Supermarket Income REIT formed a 50:50 joint venture with British Airways Pension Trustees Limited (BAPTL) to acquire a 25.5% stake in the portfolio from British Land for £102m.
In February 2021, the JV acquired a further 25.5% stake in the portfolio from Aviva for £115m and on 12 January this year it was announced that Supermarket Income REIT had acquired BAPTL’s 25.5% beneficial interest in the SRP for £196m.
In September 2021 and in January 2022, Sainsbury’s exercised options to acquire 21 stores within the portfolio for £1,040m.
The latest transaction, which concludes the contractual unwind of the SRP structure, is expected to close on 17 March 2023 with the £430.9m consideration received in three tranches.
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 10. Following completion of the transaction, Supermarket Income REIT has an option to acquire these four stores benefitting from the new Sainsbury’s leases for a net consideration of £28.3m. It is expected that the one remaining store will be sold at vacant possession value.
The REIT intends to use the net proceeds of the sale to reduce its exciting debt facilities, further strengthening its balance sheet.
Ben Green, director of Atrato Capital, the investment adviser to Supermarket Income REIT, 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 and procurement at Sainsbury’s, added: “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.”
