Supermarket Income REIT enters joint venture with US asset manager
Supermarket Income REIT has entered into a joint strategic venture (JV) with funds managed by Blue Owl Capital, a US-based asset manager with over $250bn (£188bn) of assets under management.
The real estate investment trust (REIT) – which specialises in investing into grocery properties – said the JV provides a platform for further growth, and that it intends to scale the JV up to £1bn over the coming years.
The JV has been seeded with eight supermarket assets from Supermarket Income’s existing portfolio, which have been transferred into the JV at a 3% premium to their December 2024 book value.
This seed portfolio has a combined value of £403m, an average net initial yield of 6.6%, and a weighted average unexpired lease term of 11 years.
Supermarket Income REIT will retain a 50% stake in the JV, and will receive a cash consideration of approximately £200m in respect of the sale of the assets. The REIT will also receive a management fee of 0.6% per annum of the gross asset value for the ongoing management of Blue Owl’s interest in the JV, as well as a performance fee if the JV meets certain financial targets.
Robert Abraham, CEO of Supermarket Income REIT, said: “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 (Supermarket Income REIT) has established in this market.
“For our shareholders, the JV is another important milestone in our strategy to recycle capital and grow earnings, and provides a platform for growth with specialist third party capital. This follows a period of significant progress on a number of key strategic initiatives set out in November 2024, including renewing the three shortest leases in the portfolio, material cost reductions culminating in the internalisation of the management of the company and other capital recycling activity.”
Marc Zahr, co-president and global head of real assets at Blue Owl, said: “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.”