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Supermarket Income REIT acquires Newmarket Tesco Extra in GBP61m deal

Supermarket Income REIT has acquired the Tesco Extra in Newmarket, Suffolk, from Standard Life Pooled Pension Property Fund for GBP61.0 million (excluding acquisition costs), reflecting a net initial yield of 4.6 per cent.Tesco has a long history of trading from this prominent nine-acre site which was originally developed in the 1980s and completely rebuilt in 2016.

The site comprises a 68,000 sq ft net sales area Tesco Extra with a 12-pump petrol filling station, 654 parking spaces and purpose-built online fulfilment distribution docks, supporting Tesco’s online grocery business across the region. It is being acquired with an unexpired lease term of 16 years with annual, upward-only, RPI-linked rent reviews (subject to a 5 per cent cap and 0 per cent floor). 

The Company has also arranged a new revolving credit facility (RCF) of GBP60.0 million with Wells Fargo. This secured, interest-only, RCF has an initial five-year term and two further one-year extension options. Once drawn, the RCF has a margin of 2.0 per cent above 3-month Libor which is currently equivalent to a total cost of c2.1 per cent. The RCF also includes a GBP100 million uncommitted accordion option, exercisable at any time over the term of the facility.

Ben Green Director of Atrato Capital, the Investment Adviser to Supermarket Income REIT, says: “This modern Tesco Extra is a great addition to our growing portfolio of omnichannel stores. 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.

“We are also delighted to have secured Wells Fargo as a new lender to Supermarket Income REIT. Our new facility provides us with very competitively priced, seven-year funding with room to grow to support the Company’s future investment requirements.”

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