Supermarket Income REIT H2 Earnings Call Highlights

• Portfolio metrics: 140 supermarkets with 83% inflation-linked income, average lease length of 11 years, and company aims to double portfolio to £4 billion from current £2 billion
• Net rental income rose 6% year-over-year to £122 million; acquisitions completed at 6.8% yield versus 6.2% yield on assets sold, creating 120 basis point spread
• Debt costs average 4.4% with 98% fixed or hedged through June 2028; leverage stands at 45% which management views as upper limit; company raised £100 million in equity (first since 2022) fully deployed within two months

Supermarket Income REIT H2 Earnings Summary

Key Financial Performance

Supermarket Income REIT (LON: SUPR) reported strong portfolio growth with gross asset value reaching £2.2 billion across 140 fully occupied supermarkets. Net rental income rose 6% year-over-year to £122 million, while EPRA earnings came in at 5.7 pence per share. The company completed £676 million in accretive acquisitions since July, including properties valued at £222 million with a 6.6% net initial yield.

Portfolio Characteristics

The portfolio features 83% inflation-linked income with an average lease length of 11 years. Key acquisitions included a Tesco store in Edinburgh, a Sainsbury's logistics warehouse in Avonmouth, and an M&S-anchored retail park in Nottinghamshire. Assets transferred to the company's joint venture with Blue Owl were disposed at a 6.2% yield, with proceeds reinvested at 6.8% yield, generating a 120 basis point spread.

Financing Structure

The company secured approximately £1 billion in debt financing, including its first public bond, extending average debt maturity to 3.6 years with no refinancing requirements until June 2028. Average debt cost stands at 4.4%, with 98% of borrowings fixed or hedged through June 2028. Leverage is at 45%, which management considers an upper limit.

Dividend Outlook

Dividend coverage was 93% due to temporary cash drag and higher financing costs, but management expects coverage to approach 100% in fiscal 2027. The company reaffirmed a minimum 2% dividend increase for the coming year.

Growth Strategy

Management aims to double the portfolio to £4 billion, potentially within 2-3 years in favorable conditions. Future expansion targets include grocery-anchored retail parks, European food stores, and logistics assets across Spain, Portugal, Ireland, and potentially Italy and Germany.