Supermarket Income REIT picks up Preston Sainsbury's for €60m

UK grocery-store focused investor Supermarket Income REIT has acquired a Sainsbury’s supermarket in Preston, Lancashire from Legal & General for £54.4 mln (€60 mln).

The deal equates to a net initial yield of 5.1% for the 78,000 ft2 (7,250 m2) store on a 10-acre site, with a 12-pump petrol filling station, 520 parking spaces and a purpose built online fulfilment distribution docks. 

The store has an unexpired lease term of 22.5 years with annual, upward only, RPI-linked rent reviews.

The company also announced the agreement of a new £47.7 mln five-year, interest-only, term loan facility with Dekabank. The term loan is secured against the Sainsbury’s supermarket in Preston and Tesco, Mansfield.

The arrangement furthermore includes a £40 mln uncommitted accordion option for the term of the facility. Analyst Goodbody notes that this follows the 12-month extension to the maturity on Supermarket Income REIT's £100 mln revolving credit facility in June.

'With Sainsbury's Preston, it is welcome to see the addition of another highly complementary asset, diversifying the portfolio while fulfilling each of the investment criteria of a long lease, RPI linked rent review, omni channel, and ample parking/ change of use potential,' said Goodbody's Colm Lauder in a note. 'Following the £45 mln equity raise in March, these proceeds have largely been deployed with the £45 mln acquisition of Tesco, Mansfield in April and this morning's acquisition.

'The REIT's stated LTV target is in the 30-40% range, to be achieved in the medium term, once the portfolio growth phase is completed. The last reported LTV stood at 43% at HY19,' Lauder concluded.

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