The deal includes eight freehold property purchases and related financings which will significantly increase the real estate investment trust’s portfolio
A publicly listed real estate investment trust which invests in supermarket properties has enlisted Macfarlanes on eight freehold property purchases and related financings.
The eight properties, which are intended to significantly increase Supermarket Income Real Estate Investment Trust (SREIT)’s portfolio in the United Kingdom, include six Waitrose supermarkets, a Tesco Extra and a Morrisons, in Suffolk and Telford, respectively.
The purchases follow research published in May by data and analytics company GlobalData, which stated that the United Kingdom online grocery market is set to gain an additional GBP 1.9 billion this year due to Covid-19, representing a 25.5% increase.
A GlobalData retail analyst, Thomas Brereton, offered insight into recently supermarket growth in a statement: Since the surge in demand in mid-March – with 19.0% of the population spending more on online groceries than usual – the UK’s largest supermarkets have quickly escalated capacity to fulfil unprecedented online demand, with Sainsbury’s increasing slots by 50% and Tesco reaching the milestone of a million deliveries in a week.
Acquired via a sale and leaseback transaction for GBP 74.1 million last month, the six Waitrose shops bought by SREIT were funded from the proceeds of a GBP 140 million equity raise which took place in April, on which Macfarlanes also advised.
Following the equity raise, a mortgage was obtained for five of the six supermarkets, together with an existing GBP 100 million revolving credit facility with HSBC.
The Tesco site in Suffolk, which supports online distribution, was acquired for GBP 61 million, also in July, for which SREIT obtained a GBP 60 million revolving credit facility with a new investor, Wells Fargo. Commenting on the strategic importance of the acquisition, Ben Green, a director of Atrato Capital, SREIT’s investment adviser, said in a statement that “the property has attractive lease terms, strong fundamentals and is a key online grocery fulfilment hub for Tesco, supporting both home delivery and click and collect”.
SREIT’s most recent purchase, of a Morrisons site, totalled GBP 14.25 million, and was completed on 7 August. Funded via an increase of an existing credit facility with Bayerische Landesbank, of GBP 34.8 million, a mortgage has also since been secured.
The Morrisons site is well-located, at the centre of a popular residential area. In a company press release, SREIT explained that Telford is “the second fastest growing town in the UK with the population forecast to grow to 198,000 by 2030, currently 178,000”.
Macfarlanes employed an advisory team on the transactions, led by partner Nick Barnes and finance partner Colin Morgan.
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