Supermarket Income Reit Share Discussion Threads

[chucko1] 23/2/2022 21:35

Well, it is very close to full protection and that is a lot, lot better than no inflation protection. They will have studied this and they will have adequate expertise in this matter, both statistically and otherwise. There are ways and means of mitigating the cap should there be a need to.

Two of the principals at Atrato were MDs in the Goldman Sachs Capital Markets division and one of them (SW) used to try and sell me derivatives and hedges and such like. Very capable (though he got nothing from me despite buying me a decent lunch). His successor who covered me ended up having even less luck - a stress-related illness, I understand. Whether that was down to me or GS is an open question.

[williamcooper104] 23/2/2022 21:25

Old PFI contracts are the best pure inflation/high quality credit assets, but alas they are running to maturity and the infra trusts that hold them have been reinvesting into less robust assets

[williamcooper104] 23/2/2022 21:23

Nope; and if you find a high credit quality asset that does please let us know CPI at zero and 3 is standard now on new leases RPI is CPI plus c100bps, and the 1 percent floor over the long term can have value too 4.5 yield plus 4 cap is a duration of c12 years whereas long leased logistic assets are 3.5 and 3 so a duration of c17 Add a bit of cheap leverage to 8.5 and you will get to close to 10, which gets you to well north of CPI and above RPI

[grim] 23/2/2022 20:49

The company's RNS' nearly always start with the wording 'the real estate investment trust providing secure, inflation-protected, long income'.

However a recent acquisition, which is typical of most if not all recent acquisitions 'is being acquired with upwards only, RPI-linked rent reviews (subject to 4.0% cap and a 1.0% floor)'.

My point is that a 4% cap does not provide full inflation protection.

[williamcooper104] 23/2/2022 12:37

Excellent; that will be todays spNext one ought to be using the new rating to issue cheap unsecured debt

[jg231] 23/2/2022 12:27

Further to the announcement on 20 January 2022, the board of directors (the "Board") of Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust providing secure, inflation-protected, long income from grocery property in the UK, is pleased to announce that the Company has received confirmation from the Financial Conduct Authority ("FCA") that it is eligible for admission to the Premium Segment of the Official List of the FCA (the "Official List").

Accordingly, the Company has made an application for 985,434,429 ordinary shares of one pence each, representing the entire issued ordinary share capital of the Company to be admitted to the Official List of the FCA and for a transfer of the shares from trading on the Specialist Fund Segment to the Premium Segment of the London Stock Exchange plc's Main Market (together, the "Migration" or "Admission").

The Board believes that the Migration will facilitate the Company's eligibility for inclusion in the FTSE UK and FTSE EPRA NAREIT Index Series, which is expected to take place at the Q2 2022 index review, subject to meeting the other relevant requirements for such inclusion.

[williamcooper104] 16/2/2022 06:57

Another way of looking at the rating is that A (or two notches above BBB+) is the highest corporate, unsecured rating a REIT is going to get (SPG and PLD, US/mega cap REITs are both either A or A-) Given the lack of A rated REIT paper it's likely that a well regarded BBB+ bond will trade at around same credit spreads as a higher rated note Being more highly rated can restrict the ability to go to the higher side of 30-40 LTV and can have other operational constraints; so it's only worth it if there's a material credit spread enchantment Land Secuties years ago had a corporate A rating and they ditched it as they were sick of the acne ice telling them what they could and couldn't do

[williamcooper104] 15/2/2022 21:49

https://www.fitchratings.com/research/corporate-finance/fitch-assigns-supermarket-income-reit-first-time-idr-bbb-outlook-stable-14-02-2022Fitch rating note; some good background stats and comparisons to other retail REITs

[williamcooper104] 14/2/2022 20:16

https://www-proactiveinvestors-co-uk.cdn.ampproject.org/c/s/www.proactiveinvestors.co.uk/companies/amp/news/974023

[chucko1] 14/2/2022 08:15

For Fitch, BBB- is the lowest investment grade rating. Then it goes BBB, BBB+, A-, A, A+, AA-, AA, AA+, AAA.

So it is the third lowest rating assigned to SUPR which indicates something like 0.8% worth of expected loss over the next 5 years.

It is worth noting that this is the same as that of New River REIT, which may be a little bit if a head scratcher.

- an inaugural rating tends to be a little lower (companies looking to improve their rating can mitigate over time if it is important to their finances)

- as a comparison, VOD is BBB

- Fitch cite the concentration of lease obligor (supermarkets) as a key risk. It is worth noting that the rating of Tesco is BBB- and by way of example, Carrefour in France is BBB/BBB+ (split rating from S&P, Moody's).

I asked on a recent presentation if they took any action to hedge this risk and it is clear that they do not. Elsewhere in the presentation they made a point (very clearly) of comparing the effective yield available on their stock as compared with the long term yield of Tesco corporate debt.

I am confident this management can improve this rating over time if it is worth it (it can be detrimental to shareholder returns by doing so).

[williamcooper104] 14/2/2022 08:03

BBB- is the lowest This is a corporate rating and thus a harder to get a higher rating than for secured/structured debt Most REITs if they've been rated have been BBB something

[jonwig] 14/2/2022 07:17

Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust providing secure, inflation-protected, long income from grocery property in the UK, announces that Fitch Ratings Limited ("Fitch") has assigned an Investment Grade credit rating of BBB+ (stable outlook) to the Company.

A bit off? BBB is the lowest investment grade rating, and I'd have thought a higher one was warranted. But if it's inaugural, maybe that's the normal practice.

[williamcooper104] 04/2/2022 18:42

Very pleasing share price performance today Doing much better than other net lease/long income, interest rate sensitive REITs

[brexitplus] 03/2/2022 16:47

Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust providing secure, inflation-protected, long income from grocery property in the UK, will announce its half year results for the six months ended 31 December 2021 on Wednesday 2(nd) March 2022.

Government guidance permitting, an in-person presentation for sell-side analysts and investors will be held at 8.30 a.m. on the day of the results. The presentation will also be available via webcast.

[williamcooper104] 27/1/2022 21:58

That's what I was thinking - it was a raise with the ability to then tap on an as needs basis - better for cost of carry on paying out divis on unspent cash - but does mean you will see a bit more volatility from time to time

[williamcooper104] 27/1/2022 21:54

Most of SUPRs leases are on RPI - with protection on RPI becoming CPI So that means you get an extra 100bps on average over CPI The caps are mostly at 4 2 and 5 used to be the more typical cap Increasingly CPI at 3 is becoming the norm, with a floor of zero - particularly in the hot to trot logistics market Developers/traders prefer to get an extra £1 on the rent over getting a better rent review - and valuers/much of the market still doesn't get fixed income

[zoa] 27/1/2022 19:33

jonwig - Good counter - argument. I too look at what could go wrong, at least there should not be a problem with over supply of supermarkets, whereas urban logistic assets could face this problem a few years down the line, when that happens you would not want them to have too many open market rent reviews.

[chucko1] 27/1/2022 15:46

There is an offer at 120.5 for at least 250k shares. The bid for the same amount is below 120.

Can buy smaller size all day around 120.34. Just started doing that.

[chucko1] 27/1/2022 14:52

Could it have anything todo with the recent equity raise? It was to be reopened as a sort of tap. Some chunky mid-market 100k pieces going through now.

My estimate is that this will end up being a high volume day, no matter the current reported volume.

[jonwig] 27/1/2022 14:43

ZOA - the counter-argument is that asset values increase with inflation, so what you lose in income (cash) you gain in revaluation.

That works until it doesn't, like in 2007-09. But then over-leverage kicked in, which shouldn't be a problem for most propcos now.

I'm a positive holder of SUPR, but always ask "What could go wrong?"

[zoa] 27/1/2022 14:09

Yes definitely a concern but a 4% CPI cap or less seems to be standard practice amongst Reits, unless another poster on this thread knows otherwise.

[jonwig] 27/1/2022 12:37

Possibly it's a concern I've had for a while: many (most?) of SUPR's contracts have a 4% cap on rates, yet CPI inflation could exceed 4%, and supermarkets have little pricing power thanks to competition.

An insistence on the full 4% in such circumstances might not be wise.

Of course, it could be just noise, lots of share price moves are.

[chucko1] 27/1/2022 12:31

Perhaps a big seller who has concerned itself with rates uncertainty. It was hit right from the off. Of course, the inflation aspect to SUPP should largely remove this concern, but people do strange things.

SREI suffering equally in price, hence twice the amount in percentage. And yet others unaffected.

But we often see these random moves in REITs and it is very often the case that you can successfully trade this.

[thamestrader] 27/1/2022 12:16

Seems to me most of those so-called sells are actually buys.
I bought some at just below the mid price, so of course it showed as a sell.

[bscuit] 27/1/2022 11:18

My thoughts also