ASDA, Morrisons - comment

UK Grocers: There is continued evidence of investor demand for UK grocery real estate, an important consideration given the potential for further sale-and-leaseback transactions from Asda and Morrisons as both look to unlock value from their property estates. 

Supermarket Income REIT (SUPR) is raising a further £50m of equity to fund £65.2m of acquisitions across 12 assets, at an average net initial yield of 7.3%. This compares with the 6.6% yield achieved on the £222m of acquisitions funded by its July equity raise. SUPR's decision to return to the equity market so soon after successfully deploying its previous raise provides evidence of continued appetite to grow exposure to the sector. The latest transactions include seven Sainsbury's convenience stores at 6.2% and a distribution centre at 8.0%, demonstrating demand across different types of grocery-related property. While the assets and lease structures are not directly comparable with a potential large-scale supermarket sale-and-leaseback, the transactions provide useful evidence of the availability of capital and current pricing in the sector.