Supermarket Income Reit Share Discussion Threads

[williamcooper104] 19/5/2023 08:37

It's just the scrip divi take up Nothing out of ordinary

[scruff1] 19/5/2023 07:58

Another 3m shares. Just when we were doing so well

[makinbuks] 05/5/2023 13:53

Interesting that SUPR obviously didn't consider these Q1 23 opportunities attractive, particularly the Asda in Hayes as they did another deal with the BS Pension Scheme

[speedsgh] 04/5/2023 10:30

UK supermarket investment sector sees more activity -

Following the disruption of retail capital markets throughout last year, investment into UK grocery-backed assets – which had dipped sharply in 2022 – is now showing some evidence of a cautious rebound.

According to specialist retail consultancy, Font Real Estate, investor appetite for the sector still remains measured, but the first quarter of this year saw around £330m of deals on larger format stores. This figure does not include the £431m sale of assets within the Supermarket REIT and Sainsbury’s joint venture, but was still more than the total transacted during the whole of Q1-Q3 last year. Average yields on transactions in Q1 of this year were around 5.90%.

Tom Edson of Font Real Estate comments: “We’re now seeing increased stabilisation across the sector, and this is bringing some investors back into the market – although concerns around increased borrowing costs and where inflation is headed remain material considerations.

“However, we can see that some confidence has returned and investment transactions have responded accordingly. We’re not predicting a return to the levels achieved in 2020-2021 which saw annual deal volumes of above £1.8bn, but with pricing discovery now being reflected in increased transactional volumes, this upturn is welcome following a very challenging 2022.

“What is also evident is that the pricing expectations of purchasers looking to acquire Asda or Morrisons stores is lower than that on Tesco or Sainsbury’s primarily due to the new ownership structures of the former.”

“Over the longer-term, grocery-backed assets have a track record of being resilient even in times of economic stress. This was demonstrated most recently during the pandemic, and we would expect that a sector – which offers long income on large urban sites and serve a non-discretionary use – will once again be the preferred choice for many investors.”

Examples of Q1 2023 UK grocery-backed investment transactions:

* Project M4: acquisition of four Morrisons stores by Pimco from M&G for £110m
* Asda, Hayes: acquisition by Aviva from British Steel Pension fund for £31m
* Morrisons, Plymouth: sale & leaseback acquisition by Fiera Capital for £18m

[income investor] 28/4/2023 12:16

Am I the only person who finds it odd that SUPR are proceeding with their scrip dividend and issuing shares at a discount to their last declared NAV?

[nickrl] 24/4/2023 18:28

@cc2014 the divi is well uncovered since they further bloated the share register which means the current divi is absorbing 74m. That said the JV JS funds give them options to close this gap which is what makes them potentially interesting. However, they will need to find 200m+ @6% to get to coverage by my calcs over next 12mths although the gap will also erode as the annual rent increases kick in so going to be a while yet but at least they wont be short of cash to keep paying it.

[cc2014] 24/4/2023 08:35

I tried to make sense of this.

Tesco 2033 bonds (31CM available in retail denominations) are currently paying 4.86%

SUPR are getting 6% on this plus some RPI increase.

SUPR management fee is 1.3%, other costs to manage the fund take this up to 1.86%. If you include the debt costs this rises to 3.16% (although HL show 2.8%)


SUPR NAV was 92p at December but we know will be lower now. I have to guess a number. I'm guessing 89p.


I kind of want to take the actual return on this investment to be 6%-3.16% = 2.84% at the shareholder level but of course I'm not paying 89p, I'm paying 84p as SUPR is trading at a discount. I guess you could argue for using the 1.86% for costs but there again you could argue for an even higher number than 3.16% based on the incremental cost of debt on the RCF.


However I cut it the dividend is uncovered on this investment until a bunch of RPI increases come through after the costs of running the fund.

I'll pass.

[spectoacc] 24/4/2023 08:21

My only issue is that 6% was a good yield - once. IF UK rates go to 5%, IF borrowing costs go to 7%, IF they stuck around there (the future being uncertain), then even a rock-solid 6%, even growing by (absolute max) 4% pa, doesn't leave a lot of margin, if any.

It'll probably work out, but the risk/reward over paying off debt - not so sure.

[perfect choice] 24/4/2023 08:18

It's probably also a case of not many reasonable supermarkets coming available right now, so when one does come along grab it(by acquisition), you don't know when the next opportunity will come along? In this case the British Steel Pension Fund wanted to sell their asset and being a Tesco omni-channel store, that's a decent enough acquisition for SUPR IMHO.

[scruff1] 24/4/2023 08:14

It does I agree but Im just really commenting on the coincidental timing of Specs comment yesterday and my own thought yesterday (which I didnt post) followed by todays announcement

[chucko1] 24/4/2023 08:02

Scruff, depends what sort of property. But supermarkets at least are near recession-proof, which is where the fault-lines lie in some of the REIT analysis.

[scruff1] 24/4/2023 07:51

Funnily enough Spec (though I have read nothing about this yet but the headline) I thought yesterday after your comment that I agree that paying off debt is usually a good thing especially with such high rates - which may or may not last long - its also a not a bad time to buy property

[spectoacc] 24/4/2023 07:18

Lol. Those hopes lasted 24hrs.

"The acquisition is being funded from the first tranche of sales proceeds of the Company's stake in the Sainsbury's Reversion Portfolio (the "SRP")."


Looks not bad in fairness, 6% rising by 4% a year, but not knock-out either.

[cwa1] 24/4/2023 07:16

Acquisition of a tesco in worcester for GBP38.3 million

Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust providing secure, inflation-linked, long income from grocery property in the UK, announces the acquisition of a Tesco omnichannel supermarket in Worcester, for a total purchase price of GBP38.3 million (excluding acquisition costs), reflecting a net initial yield of 6.0%.

Tesco has been operating at the 6.5 acre site for over 30 years. The site comprises a 47,297 sq ft net sales area supermarket, a petrol filling station and 515 car parking spaces. The store is also an online hub for Tesco operating nine home delivery vans and a Click & Collect facility. The store is being acquired from British Steel Pension Fund, with an unexpired lease term of 12 years, with annual upwards only RPI-linked rent reviews (subject to a 4.0% cap and 0.0% floor).

The acquisition is being funded from the first tranche of sales proceeds of the Company's stake in the Sainsbury's Reversion Portfolio (the "SRP").

Ben Green, Director of Atrato Capital Limited, the Investment Adviser to Supermarket Income REIT plc, said:

"This acquisition further strengthens SUPR's portfolio of top trading omnichannel supermarkets, evidencing our ability to redeploy the proceeds of the SRP sale at yields which are accretive to the portfolio."

[spectoacc] 23/4/2023 07:58

Thanks @nickrl - yes, and you know my view on the "inflation-linked" nonsense.

But for near-term, +4% uplifts coming.

I hope they chose to pay off debt. Good point re income, thanks.

[nickrl] 22/4/2023 23:36

@Specto the JV JS income was trapped in the SPV so makes no difference at the cash level. The divi isn't covered by cash earnings given the vast amount of new shares issued over last 12mths. The outlier here though is they will be clearly be flush with the JV cash shortly so can remedy that by either paying off debt or buying more assets. Majority of leases have some level of CPI/RPI linkage although capped at 4% so aint going to set world on fire but gives a foundation to that yield.

[spectoacc] 22/4/2023 17:02

Yup, LTV coming right down post-Sainsburys, albeit losing income too of course.

NAV isn't the key metric for any REIT, unless covenants getting hairy.

SUPR a step down from eg AGR, PHP in security of tenant, but I've a suspicion that may flip with a Labour govnt. SUPR perhaps on a par with LXI, but with IMO better inflation linkage, and no Alvarium.

Are they yielding enough, when rates could go to 5%? I reckon so, since rates to 5% because inflation is staying in double figures for longer.

Either way, they look decent to me - FV bordering on cheap, & continue to hold some. I'd feel differently if they had Asda or Morrisons as tenants, and maybe that causes a "what about if/when SBRY get taken out" query.

[rik shaw] 22/4/2023 16:18

Remember LTV has the potential to drop below 30% once the Sainsbury transaction completes in July.

[ifthecapfits] 22/4/2023 16:01

Spot on riverman.

[riverman77] 22/4/2023 12:27

I'd say SUPR looks very good value right now - personally wouldn't pay too much attention to the NAV as I think supermarkets themselves are undervalued (thus the NAV understates its intrinsic value - Tesco and Sainsbury themselves know this and are buying back their stores. Supermarkets used to trade at a premium to the wider property market because of the quality of the cashflows - they now trade at a discount which doesn't seem to make sense}.
The key point is the yield. Obviously there are higher yields available, but these are generally poor quality assets. I think 7% is attractive for SUPR given it should be extremely resilient, and long-dated, inflation-linked rents are usually sought after (yes I'm aware there are RPI caps but this would only be an issue if we have years of 10% inflation - if inflation stays elevated then more likely it settles in the 4-5% range, in which case SUPR should capture most of RPI).

[mindthestash] 22/4/2023 11:48

Thanks to JG231 for clearing up where SUPR sits today on the EPC journey. They look to be well on the road and with all those large roofs well placed. It might well be the tenants will go for the atratos solution in front of the landlord to get the revenue stream? Interesting to understand how this plays out in the leases.
THANKS again JG231

[jonwig] 22/4/2023 11:45

#1 and #2 - the market thinks it warrants a lower discount and yield than, say, offices and general retail.

#3 "Drawn debt 100% fixed (or hedged to fixed) at 2.9% weighted average cost" suggests 40% LTV isn't an issue. And 14 yr average WAULT.

If you're comparing across the whole commercial property sector, you're ignoring the big range of different issues. And there are lots of anomalies: I could quote the huge discount afforded to SGRO (and other big sheds) even after its recent trading statement.

But sure, it could easily drop to 80p, naturally.

[skyship] 22/4/2023 11:17

I've never understood the investment case for SUPR. In the past way over-valued; now less so, however the bald stats of:

# EPRA NAV discount of 9.2% - too low

# Yield a prospective 7.2% - good, but not great

# LTV of 40% - way too high

...suggest to me a further fall to c80p more than likely.

[nickrl] 21/4/2023 12:01

New ATL turning into a zero from hero but getting interesting 7%+ yield now.