Supermarket Income REIT PLC (LON:SUPR) targets an attractive level of income, with the potential for capital growth, and 7–10% pa total shareholder return over the medium term. It invests in a diversified portfolio of supermarket property, let to leading UK supermarket operators on long, RPI-linked leases. EPRA NAV total return in the six-month period was 3.1% or an annualised 6.3% (see our last update). The company plans to raise c £25m in new equity to part fund additional, identified assets.
SUPR plans to raise c £25m in new equity capital by way of a placing and offer for subscription of 24.7m new ordinary shares at 101p. Depending on demand and the number of shares issued, the proceeds, and associated gearing will be used to acquire one or more additional supermarket assets. This will further diversify the portfolio and supplement the existing and growing inflation-linked income stream. SUPR expects the increase in the size of the company to generate operating efficiencies by spreading its fixed operating expenses over a larger issued share capital, while there is potential for share trading liquidity to be enhanced and the shareholder base broadened.
Two near-term acquisition targets that meet the company’s stringent acquisition criteria have been identified and are currently in advanced due diligence. Both are omnichannel stores let to Tesco (LON:TSCO), benefitting from RPI-linked leases with a weighted average lease term of 19 years, and low site cover, proving asset management opportunities. Three additional opportunities with an aggregate value of c £160m have been identified. Details of the share placing, which is expected to close by 21 March 2019, are available on the company’s website (www.supermarketincomereit.com). The new shares will be entitled to the third quarterly DPS, targeted at 1.419p, due to be declared in April 2019.
Business description
Supermarket Income REIT, listed on the special funds segment of the London Stock Exchange, invests in supermarket property, let to leading UK supermarket operators, on long, RPI-linked leases. The investment objective is to provide an attractive level of income, with the potential for capital growth. Its target is 7–10% pa total shareholder return over the medium term.