Supermarket Income REIT buys Preston Sainsbury's for £54.4m

Grocery real estate investor Supermarket Income REIT announced the acquisition of the Sainsbury's supermarket in Preston, Lancashire from Legal & General for £54.4m on Tuesday, reflecting a net initial yield of 5.1%.

The London-listed specialist fund said the J Sainsbury store, originally developed in 1992 and extensively refurbished in 2010, had a “long history” of trading from the “prominent” 10 acre site adjacent to Preston town centre.

It said the supermarket comprised a 78,000 square foot net sales area with a 12-pump petrol filling station, 520 parking spaces and purpose built online fulfilment distribution docks, supporting Sainsbury's online grocery business across the region.

It was being acquired with an unexpired lease term of 22.5 years with annual, upward-only, RPI-linked rent reviews, subject to a 4% cap and a 1% floor.

The company said it had also arranged a new five-year, interest-only, term loan facility with Dekabank.

It said the £47.6m facility was “attractively priced” with a fixed rate equal to a 1.35% margin over three-month LIBOR, which was currently equivalent to a total cost of 2.0%.

The facility was secured against the Sainsbury's supermarket in Preston, and the Tesco store in Mansfield, which was acquired in April.

Supermarket Income REIT said the facility also included a £40m uncommitted accordion option for the term of the facility.

“This Sainsbury's supermarket is a great addition to our growing portfolio of omnichannel stores,” said Ben Green, director at Supermarket Income REIT’s investment advisor Atrato Capital.

“The property has very attractive lease terms, strong fundamentals and provides further diversification to the portfolio.”

Green said the firm was also “delighted” to have secured Dekabank as a new lender to the group.

“Our new facility provides us with very competitively-priced, five-year funding with room to grow to support the company's future investment requirements.”