Major UK real estate investment trust banks on a Tesco Extra and Aldi in Leicester for returns

Saleha Riaz
·2-min read
The Tesco store acquired has parking provision for over 700 vehicles and a 12-pump petrol filling station. Photo: Getty Images
The Tesco store acquired has parking provision for over 700 vehicles and a 12-pump petrol filling station. Photo: Getty Images

Supermarket Income (SUPR.L), a real estate investment trust, said it is acquiring a Tesco (TSCO.L) Extra site and an Aldi supermarket site in Leicester from British Land (BLND.L).

Ben Green, director of Atrato Capital, the investment adviser to Supermarket Income, said the Tesco store operates as a “key online grocery fulfilment hub for Tesco” while “the Aldi acquisition provides further tenant diversification for the portfolio.”

“We believe this site offers valuable asset management opportunities,” he added.

Supermarket Income's stock price over five days. Chart: Yahoo Finance UK.
Supermarket Income's stock price over five days. Chart: Yahoo Finance UK

Supermarket Income provides secure, inflation-protected, long income from grocery property in the UK. It focuses on grocery stores which are omnichannel, fulfilling both online and in-person sales. All of the its 48 properties — 22 direct properties and 26 via joint — venture are let to top UK supermarket operators, it said.

The Tesco store the trust acquired has parking provision for over 700 vehicles and a 12-pump petrol filling station. It also has purpose-built online fulfilment facilities which support Tesco's online grocery deliveries across a 262,000 population catchment area.

The property is being acquired with an unexpired lease term of 7 years, with 5-yearly, upwards only, open market rent reviews. The next rent review is in February 2023.

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The Aldi supermarket is expected to open this year and extends to 14,800 sq ft of net sales area. It has been acquired with an unexpired lease term of 25 years (with break options at years 15 and 20) with 5-yearly, upwards only rent reviews.

Adjoining the two stores is a parade of units comprising 33,000 sq ft net sales area, predominantly occupied by Costa, Greggs, WH Smiths and Pets at Home. The total consideration is £63.4m ($83.9m) excluding acquisition costs, reflecting a combined net initial yield of 6.4%.

The site is adjacent to Fletcher Shopping Mall which will be retained as a separate interest by the vendor.

Last month it was reported that Supermarket Income bought a Sainsbury’s supermarket in Newcastle upon Tyne from the National Farmers Union for £53.1m, reflecting a combined net initial yield of 4.1%.

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