Supermarket Income REIT has announced the sale of its interest in the Sainsbury’s Reversion Portfolio (SRP) to Sainsbury's for a total of £431 mln (€490 mln).
The sale completes the previously announced acquisition by Sainsbury’s of 21 of the 26 SRP properties and concludes the contractual unwind of the SRP structure.
The transaction is expected to close on 17 March 2023 with the £431 mln consideration received in three tranches: £279.3 mln will be received on 17 March 2023 and £116.9 mln on 10 July 2023. The third tranche of £34.7 mln is conditional on the sale of the remaining five stores in the SRP Portfolio.
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 ten. Following completion of the transaction, SUPR has an option to acquire these four stores benefitting from the new Sainsbury’s 15-year leases for a net consideration of £28.3 mln. It is expected that the one remaining store will be sold at vacant possession value.
Following this transaction, SUPR estimates that the investment will have provided a money-on-money multiple of 1.9x and an IRR of 30%.
‘This investment has been highly accretive for our shareholders and is further evidence of the long-term strength and value of UK grocery property,’ said Ben Green, director of Atrato Capital, the investment adviser to Supermarket Income REIT.
SUPR formed a 50:50 joint venture with British Airways Pension Trustees Limited (BAPTL) in May 2020 to acquire from British Land a 25.5% stake in the SRP Portfolio, one of the UK's largest portfolios of supermarket properties, for £102 mln (excluding acquisition costs). Subsequently, in February 2021 the JV acquired a further 25.5% stake in this portfolio from Aviva for £115 mln.
Earlier this year SUPR announced that it had acquired BAPTL's 25.5% interest in the SRP Portfolio for £196 mln resulting in the company's interest in the SRP Portfolio increasing to 51.0%.
The SRP Portfolio was created in 2000 through two sale and leaseback transactions which were funded by bonds issued under two securitisations, Highbury Finance B.V. and Dragon Finance B.V. Highbury and Dragon comprise 16 and 10 Sainsbury's supermarkets respectively.