Supermarket Income REIT (the "Company”) entered into a 50:50 joint venture (“the JV”) with British Airways Pension Trustees Limited (“BAPTL”) to acquire a beneficial interest in one of the UK’s largest portfolio of supermarket properties (the “Sainsbury’s Reversion Portfolio”). The JV acquired its beneficial interest through two transactions (in May 2020 and February 2021) for a total consideration of £217m excluding costs.

The Company’s contribution to the JV was £108.5m, excluding costs.

The Sainsbury's Reversion Portfolio consists of 26 Sainsbury's supermarkets. It is a geographically diverse high quality portfolio of stores with a London and south east bias. It was created through two sale and leaseback transactions by Sainsbury’s in 2000. Following this latest transaction, the freeholds of the properties are now owned by Sainsbury’s (49%) and the JV (51%)(1).  


The Portfolio is funded by bonds, which mature in 2023. The rental income received from the Portfolio pays down the outstanding balance of the bonds to a final amount which will be repayable in 2023 by way of a refinancing or sale of the Portfolio.  

Investment Summary:

  • High quality portfolio: the JV investment gives the Company an interest in a large freehold high quality portfolio of predominantly omnichannel supermarkets with strong property fundamentals.  

  • Progressive valuation growth: the Board is targeting annualised NAV growth from the investment in excess of the Company’s targeted annualised total shareholder return of 7-10%(2). 

  • Optimal capital structuring: the 50% JV investment interest is sized to minimise dividend cover dilution for the Company while maximising the total return to shareholders. 

  • Attractive future pipeline: the acquisition gives the JV a stake in a significant portfolio and the opportunity to increase that holding at the appropriate time. 

The Portfolio 

The Portfolio was created in 2000 through two sale and leaseback transactions which were funded by bonds issued under two securitisations Highbury Finance B.V. (“Highbury”) and Dragon Finance B.V. (“Dragon”).  Highbury and Dragon comprise 16 and 10 Sainsbury’s supermarkets respectively. The offering circulars for the original securitisation transactions are available via a paid for service on  

The Occupational Leases 

Sainsbury’s occupies the stores under the current occupational leases (the “Occupational Leases”) and pays 100% of the rents. The Occupational Leases generate an annual rental income of £53m, with the lease rent subject to fixed annual uplifts of 1% per annum. They expire conterminously with the maturity of the bonds in March 2023 (in relation to Highbury) and July 2023 (in relation to Dragon).


The income from the Occupational Leases services the interest and principal repayments of the bonds.  The bonds amortise out of the rental income to a remaining outstanding debt amount of £315 million on expiry in 2023. The debt due on expiry is expected to be funded by way of a re-financing or sale of the Portfolio. 


At lease expiry in 2023, Sainsbury’s has the option to extend the leases for a further term of 20 years at the higher of passing rent or open market rent, subject to upward-only, five yearly market rent reviews or to vacate the properties.  

JV Investment Adviser

Atrato Halliwell Limited (the “JV Investment Adviser”) will act as the investment adviser to the JV and is a newly established affiliate of Atrato Capital Limited. The JV Investment Adviser will receive an annual advisory fee payable by the JV only on the proportion attributable to BAPTL. There will be no additional advisory fee payable by the Company. The JV will also pay the JV Investment Adviser a promote fee based on the financial performance of the JV. The promote fee is a market standard, carry waterfall accruing from an 8% IRR but only payable by the JV if annualised returns to the Company exceed 10% at refinancing or sale.  


(1)  The percentage beneficial interests note above relate to estimated waterfall distributions to the beneficial owners which have been determined based on estimated portfolio values after deducting estimated amounts relating to the repayment of underlying bonds and other fixed and pre-stipulated payments due to the beneficial owners. The percentage allocations may differ depending on changes to the underlying estimates.

(2)  There is no certainty that these illustrative projections will be achieved 


Joint Venture portfolio map

Download full portfolio details