Supermarket Income Reit Share Discussion Threads

[bondholder] 21/11/2024 04:05

The implied passing rent on the Sainsbury purchase is around £33 PSF. Lidl are signing long leases for £12 to £19 on new build stores and many items have to price match due to competitive pressure. Wages and utilities etc are similar for all operators. Is the old metric of rent at 4 percent of turnover still applicable in a world of compressed retail margins ? Might the over renting be far worse than expected? Why don't SUPR provide a detailed analysis of this in their reports?

[williamcooper104] 20/11/2024 18:13

I don't see it as a likely take over candidate either The US net lease REITs all have a higher cost of equity now, and PE could make it work at the current share price but not with a material premium that they'd need to pay I'm happy with that - I've had my fun with API/EBOX/BPCT/GABI (less fun with DGI9 :) and hopeful with ASLI and RESI So happy to hold here - returns from winding up trades need to go somewhere

[spectoacc] 20/11/2024 15:58

Thanks @speedsgh.

[speedsgh] 20/11/2024 13:55

@nickrl - yes, was aware of RPI collars/caps. i just stumbled across the data in the 2024 annual report so thought i would post on here for ease of reference in future.

[chucko1] 20/11/2024 13:48

Nickrl, even if it was not to recover and was at, say 62p, then 15% below a reduced NAV of 90p - so 76.5p - would represent a 26% total return from the current level.

I certainly get your point, but I do not use historic cost (and I have lost a little bit here even including dividends) as a decision input and so this return calculated above should provide some comfort against your concern.

I do not think SUPR is a likely takeover candidate, and would not agree to a lowball price most likely.

[nickrl] 20/11/2024 13:47

@speedsgh most leases on RPI are capped at 4% pa so we wont get a big boost on anything due a 5yrly review over next few years but could be be some 10-15% plus uplifts.

[8gggggggg] 20/11/2024 13:44

Apologies for disagreeing again.1..Blackrock are selling (. like I should ). as they quite rightly distrust this distracting European adventure.2...Check out the ASDA. Site in Hallesown .A..Next door to Cornbow shopping centre..B. Located in prime residential area so suitable for redevelopment for expensive houses.if ASDA fails.Dakas.

[speedsgh] 20/11/2024 13:07

SUPR income mix by rent review type - indexation (30/6/24):

RPI 70%
CPI 6%
ILC 4%
Fixed 2%
OMV 18%
Total 100%

SUPR income mix by rent review frequency (30/6/24):

Annual 58%
5 yearly 41%
7 yearly 1%
Total 100%

[nickrl] 20/11/2024 13:01

Others have plenty of debt that needs refi over next 18-24mths but aren't being bashed down as much and its not as if supermarkets aren't going to be needed. Had loaded up on several occasions this year already but even a 9% yield on current purchases makes me weary that once these reits get pushed down they never recover and then get sold off too cheaply.

[speedsgh] 20/11/2024 13:00

Agreed, the less exposure to Asda & Morrisons the better imo

Exposure by valuation (30/6/24):

Tesco 48%
Sainsbury’s 29%
Morrisons 5%
Waitrose 4%
Carrefour 4%
Asda 2%
Aldi 1%
M&S 1%
Non-food 6%

[chucko1] 20/11/2024 12:59

CC, I would say that a lot of what you wrote in #2391 is bang on the mark. However, if you are going to make what is tantamount to an interest rate play, recall that Ben Green and Steve Windsor are more experienced in this field than ANY OTHER REIT manager.

But it is not interest rates on their own, but rather, the relationship between relevant inflation and interest rates. In that respect, we have moved since 2022 from long term inflation yields (SUPR mimic this) rising from -250bps (quite absurd) to +125bps or so. Ceteris paribus, that has rerated SUPR from very expensive to pretty cheap. Cheap things can get cheaper, but my own inflation and IR projections (using today's curves, and I have been doing this for ages prior) indicate that dividend cover will be tight but >1.0x, and incremental measures such as market value management fees and in-house service provision as well as increasing yield spreads via EU purchases reflects equal concern from management. However, I see c. 9% as excellent compensation for this blend of long-term risks/opportunities.

On this issue of Blackrock's variation in holding, I would read literally nothing into that. It could arise from a variation in a short or modification in a third party total return swap, whether referencing SUPR or perhaps an index including SUPR - or one of a hundred other reasons. Blackrock tend to act as a lender of stock on many issues, simply because they are bound to be long term holders in order to hedge their sales of index-linked products and other relevant securities.

[garbetklb] 20/11/2024 12:21

With regard to the "missed ASDA opportunity", I'm not sure I'd be v happy to increase exposure to ASDA.......

[williamcooper104] 20/11/2024 12:20

Remember that in an inflationary environment unlike many commercial property types - SUPRs assets will see market rental growth - so the chances that come regear that 7 plus yield can be maintained are greater - and with a new long rack rented lease you'll likely see some capital growth

[williamcooper104] 20/11/2024 12:18

Per Tescos - every little bit helps You could have raised equity that was accretive but it would have been short term dilutive to divi cover - so would have gone down as well as the last budget

[cc2014] 20/11/2024 11:58

The challenge here is that with a market cap of £850m, 68p is what the market currently thinks it's worth. £850m is large enough that every fund manager and institution will have run it's slide rule over it and decided 68p is the price.

It's not like a £200m market cap where from time to time, incorrect pricing occurs because it's below the level some can be bothered to look.


It would be my guess that the market does not like the gearing and the yield on the investments. The recent purchase (made from RCF no doubt is a yield of 7.8%, call it 6.8% after fund manager fee.

Interest rates are 4.75%. If loans reset in due course at SONIA +200bp, that would be somewhere around say 6.5%. Is investing in something with a return of 7.8% when it's costing you 6.5% to borrow worth it?

Yeah I get the rent rises and I get interest rates are forecast to fall, but if interest rates start rising because Labour keep borrowing more than the market wants to give and Trump introduces worldwide inflation things won't look so rosy.


So, from where I'm sitting SUPR looks like a gamble on the future direction on interest rates, with a high beta. The beta keeps going up.

So, as always it depends on your attitude to risk

[speedsgh] 20/11/2024 11:47

chucko, your 2386. superb post.

[hugepants] 20/11/2024 11:25

Ok yield isn't everything but still, makes you wonder why Blackrock are selling this down on a 9% yield. Maybe riskier than it looks.

[woodhawk] 20/11/2024 11:07

Anyone who has SUPR shares with IG Index might want to check their accounts. The recent dividend payment to my SIPP account is approx 20% short. I (and I'm told others) have queried this with IG who blame a third party. However their own accounting is wrong as my statement from them (the product of shares held x 1.53p) is incorrect. I find this quite worrying - that IG's accounting is misleading and the mistake not easy noticed. They have still not resolved the issue five days after I notified them.

[chucko1] 20/11/2024 11:01

8gggg, you have ignored just about everything the Board announcement said, and what was apparent from the initial Carrefour purchase.

The Carrefour purchase was at a yield spread superior to what was readily available in the UK.

Capital would possibly be available for expansion into Europe via capital recycling.

The comment about only having a small footprint (currently) in Europe is absurd - there is a clear intention to scale up this new geography.

As I have argued previously, EU purchases may be less risky owing to the likely increased stability in refinancing rates, with the tenant risk on a par with Sainsbury (as evidenced/suggested via current CDS rates)

On the issue of the non-purchase of the ASDA store, as I have also argued previously, let management make such decisions and if they are as blindsided or "asset-ignorant" as you are (merely) guessing they are, why are you invested at all?

It is likely that the better route is to make selective purchases as and when they become available (and may be the only feasible route), and maintain the exacting property attributes they believe are necessary. Far better to take a year longer building the preferred portfolio than regretting a given purchase for the length of the remaining lease! In fact, the argument is not even a close one as so amply evidenced by AEWU and the continual moaning about them waiting to reinvest.

[8gggggggg] 20/11/2024 09:55

My point is that ....1. The existing investment is so small it will have no effect on PandL and divi.2 An investment of £250m is required to make a significant difference.3 There is snowballs chance in....... to obtain bank loan at competitive price to finance this madness buying spree.3A. .., Board have ruled out my suggestion to raise equity.4. So it will not happen , and the existing investment will absorb valuable management time.5 Please concentrate on UK, already the Board attention lapsing as they failed to acquire the ASDA store that Metro sold last week.A wonderful investment that would have fitted our portfolio perfectly.BestDakas.

[m_kerr] 19/11/2024 19:32

My guess is that the seller of the acquired SBRY asset assume reversion at 20% below current levels, making it approx a 6% NIY.

[tonysss13] 19/11/2024 15:04

Blackrock been selling, below 5%

[laurence llewelyn binliner] 19/11/2024 13:41

Not invested here yet, but researching and getting close now, 6 pence income for 69 pence looks strong and sustainable, so the risk is will the share price soften more than 6 pence (or not) in the next 12 months..

19.08.2024 - 100% of drawn debt fixed or hedged at a weighted average finance cost of 3.8% including post balance sheet events. The company has a weighted average debt maturity of 4 years..

Next debt refinancing is 2026, so the likely cost impact from there out is higher..?, the derivative swap hedges have got the better of me so far.. :o)

To partially mitigate the interest rate risk that arises as a result of entering into the floating rate debt facilities referred to in note 19, the Group has entered into derivative interest rate swaps and caps.

[chucko1] 19/11/2024 12:36

Update: Tesco has a CDS spread of 48bps compared with Sainsbury at 68bps and Carrefour at 64bps.

By comparison, Metro is 107bps and Casino went up in smoke.

So SUPR are picking the clearly strongest name in France, currently. At that, a name no weaker than Sainsbury, according to current market levels. The market levels are a significantly better predictor of credit stress than those of ratings agencies.

[dartboard1] 19/11/2024 10:23

A bit rough saying they're not as financially sound. Lower operating margin but less net debt. Overall they're two companies that arnt going anywhere (ie nil bankruptcy risk) over the next 15-20 years.