Supermarket Income REIT has established a strategic joint venture with funds managed by US alternative asset manager Blue Owl Capital in a significant move that signals confidence in the UK grocery property sector. The partnership has been seeded with eight high-yielding omnichannel supermarket assets valued at €479m (£403m) from SUPR's existing portfolio.
The joint venture structure enables Supermarket Income REIT to retain a 50% stake while receiving approximately €238m (£200m) in net cash consideration. Additionally, the company will earn a management fee of 0.6% per annum of the gross asset value for managing Blue Owl's interest, with potential performance fees if specific financial targets are met. This arrangement provides a platform for further growth with ambitions to expand the JV's assets to €1.2bn (£1bn) in the coming years.
"The JV with Blue Owl's managed funds brings a high-quality, strategic capital partner that shares our conviction in the value of high-yielding UK supermarkets. With the potential to grow to £1bn over the coming years the JV partnership represents Blue Owl's managed funds' first major investment in the UK grocery space and is a strong endorsement of the expertise and track record SUPR has established in this market," said Robert Abraham, CEO of Supermarket Income REIT.
The proceeds will be used to reduce debt in the near term, lowering the company's loan-to-value ratio to approximately 31%. SUPR plans to reinvest in additional supermarket properties either directly or through the joint venture. The eight seed portfolio properties include stores operated by Morrisons, Sainsbury's, and Tesco across the UK, with an average net initial yield of 6.6% and a weighted average unexpired lease term of 11 years.
"SUPR is the leading UK grocery real estate investor, and we view them as the right counterparty as we execute on our first major transaction in the UK grocery sector. We see an opportunity to generate attractive returns from these assets, which are underpinned by the growing and highly resilient UK grocery sector. We look forward to working with SUPR to grow the JV, as we execute on an attractive pipeline of UK assets," added Marc Zahr, Co-President and Global Head of Real Assets at Blue Owl.
People mentioned:
- Robert Abraham - CEO, Supermarket Income REIT
- Marc Zahr - Co-President and Global Head of Real Assets, Blue Owl Capital
Companies mentioned:
- Supermarket Income REIT plc - UK-based real estate investment trust specialising in grocery property
- Blue Owl Capital - US alternative asset manager with over €297bn ($250bn) in assets under management
- Morrisons, Sainsbury's, Tesco - UK supermarket chains featured in the portfolio
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