Supermarket Income Reit Share Discussion Threads

[return_of_the_apeman] 10/4/2024 10:59

X-div tomorrow:-)

[hindsight] 03/4/2024 11:55

Yes nothing wrong with some short dated now. Plenty of trusts took on high long debt pre 2010 and then had 10 years of ZIRP pain

[chucko1] 03/4/2024 10:08

It's not the SONIA short rate which matters, but the rate pertinent to the term of the underlying facility, amounting to 6.10% all in until Sep 2026. NIY for the marginal property was circa 7.5%, although with an intended lease far beyond Sep 2026, so a view is being taken on the future refinancing. As it happens, an 8 year fix all in from Sep 2026 is 5.60% give or take a few bps.

They have effectively bought a margin of almost 200bps in the package of Tesco property + loan, with a risk taken on refi in 30 months. That risk may have been calculated with a view that higher rates is symbiotic with higher inflation which, in turn, is a benefit to them. This will be why they continue to fix at shorter maturities than one might think optimal, except that they are countered by the likely belief they have that inflation will not often, if at all from here, poke its nose above 4%.

I would do exactly the same, and the idea that [all] borrowing should [always] be fixed is totally incorrect. It's only correct (or otherwise) in hindsight and with a suboptimal investment horizon.

[nickrl] 03/4/2024 10:03

@Makinbuks that was my thoughts but other posters have said the people running this are well versed in the fixed interest world so have to keep the faith.

[makinbuks] 03/4/2024 09:29

I'm surprised they hedged the additional amount, surely the odds are that SONIA will fall between now and September 2026. 6.73% is high in comparison to the NIY's we've seen here

[nickrl] 03/4/2024 08:58

@CWA1 as long as its hedged on the same terms as the SMBC arrangement maybe a good deal but depends how much the hedge has cost.

[cwa1] 03/4/2024 07:23

3 April 2024



SUPERMARKET INCOME REIT PLC

(the "Company")



DEBT REFINANCING UPDATE



Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust providing secure, inflation-linked, long income from grocery property in the UK, announces that it has increased its unsecured facility with Sumitomo Mitsui Banking Corporation ("SMBC") by £37.5 million to £104.5 million.



The interest-only facility matures in September 2026 and is priced at a margin of 1.55% above SONIA on the increase amount, with the existing £67 million remaining at a margin of 1.40% above SONIA, and is fully hedged for the term of the facility.



Following the acquisition announced on 22 March 2024, the Company has a pro-forma LTV of 34%.



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



"We are pleased to continue our relationship with SMBC, a key funding partner to the Company. Our strong relationships with existing lenders, and quality of the portfolio, continues to allow the Company to access debt financing at attractive margins."

[jg231] 28/3/2024 09:31

And just weight of capital. If you're not a sector expert (or you're a Canadian pension fund for example), investing in something that approximates to London is an easy sell to your investment committee. So prices are higher. Whereas, in reality with supermarkets (as Jombaston says), the cashflow is exactly the same and really based on the strength of trading at that site.

[williamcooper104] 26/3/2024 20:17

Usualy alternative use values are better in the SE

[jombaston] 26/3/2024 17:28

The point is that the market prices property tighter in the South East. SUPR doesn't see this as justified for what they want.

Supermarkets don't trade any better in the South East neither are they more important to the operators. Atrato therefore believes that it makes sense to be buying elsewhere where there is better value and higher yields, hence the relatively few properties in the SE.

[m_kerr] 25/3/2024 16:04

Their WAULT is 13 years so not materially ahead of the 11 year lease term they recently purchased. Therefore id only expect minimal premium, if any, in that respect.

On location, having had a look at their portfolio map I don't see any evidence of a London / south east bias here therefore no premium justified in that regard.

[makinbuks] 25/3/2024 14:26

Thank you, all good points

[williamcooper104] 25/3/2024 13:08

Also there's a prenlmium for London/south east and a discount for elsewhere

[jg231] 25/3/2024 12:03

On the first point, they've previously pointed out that the 5.8% average valuation yield on the whole portfolio is very much that, an average. Very long leased rack rented stores are valued at tighter yields while shorter and/or overrented stores are valued at wider yields. There was a slide on it in the results presentation. This one is 12 years, so the 7% must reflect some element of overrenting.

On the second, they bought this store from an institutional investor, not Tesco, so nothing to read into it regarding Tesco's thinking.

[makinbuks] 25/3/2024 11:24

m_kerr, I agree with your earlier post on the portfolio valuation, surely this transaction defines the market price and therefore the NAV should be written down accordingly.

I also wonder about Tesco's motivation here. Why sell this now? Might it be an indication that they think three properties in the area is too many?

[igoe104] 25/3/2024 07:09

Another Director buy.

[m_kerr] 23/3/2024 12:01

The management fee income is highly attractive on a roughly £1100m NAV. In addition, for such a large portfolio of about £1.7bn (in comparison) there are only 55 assets accounting for 90% of value, let on long term FRI leases, meaning atrato don't need a large team resources to manage this.

Really this should be internally managed. Now the portfolio is in place there is no need to pay premium fees.

[garbetklb] 22/3/2024 22:13

Speed
Google tells me it's Lysander Road - and the plot is about the right size.
Cheers
Andy

[speedsgh] 22/3/2024 19:21

Anyone any idea which Tesco Superstore in Stoke on Trent they have acquired? Looks like 3 to choose from...



1. Newcastle Rd ST4 6PL -
This is the most central of the 3 and looks lowest quality property.

2. Lysander Rd ST3 7WB -
South-east of the town

3. Liverpool Rd, Kidsgrove ST7 1DX -
North of the town

[tradez4dayz] 22/3/2024 18:31

Agreed WC, 2 years is probably below average to what we have seen recently.Lmp just paid alvarium 2 and a bit x plus a kicker.To me it just feels odd timing or an odd decision unless something is pending or unless the board has told atrato it wants to move in that direction. In which case that should have been announced.Odd

[chucko1] 22/3/2024 14:16

You should not expect to get Atrato cheaply. I would be appalled if they had.

The previous comments make little sense in the context of the too-easy trashing of REITs for short term gains. That is so value destroying for all but activists who would likely engage in rape and pillage were it not for their hedge fund employment.

A dog is for life, not just Xmas. Same for REITs, hence the 13 year horizon I employ for SUPR analysis.

[williamcooper104] 22/3/2024 13:40

Two years man fee isn't outrageous Look at what other REITs have paid to internalise management

[jombaston] 22/3/2024 13:38

The poison pill means that on any takeover, the directors get a little bit more and the shareholders correspondingly less. As it was before, any acquirer could have negotiated the payments lower. The store acquisition looks good but this behaviour is disappointing.

[williamcooper104] 22/3/2024 13:26

Yes plus they are often buying on low site densities So long term there will likely be some development/planning gains

[jimmywilson612] 22/3/2024 13:13

On their presentation I watched - they just don't buy and hold, but consider if they can increase the yield of the property.

E.G Buy a Tesco Store and add a costa coffee drive thru on it.

So you can't just look at the yield at purchase or current, as there might be plans afoot to increase the yield over time.