The Lemon Fool

I've been looking at PHP as a possibility for my HYP and on my travels came across SUPR, not an HYP share but with a forecast yield of 5.3% and the potential for capital growth I'm tempted anyway. They buy and rent back supermarkets including distribution centres on long leases which according to the blurb produces long term, stable, predictable and inflation linked income.

https://www.supermarketincomereit.com/about

Anybody else looking?

Apart from the fact that it seems quite small, I wonder how secure some of these rents really are? With the whole supermarket sector undergoing change at the moment and the upsurge in online shopping, are rented properties not going to be the first that any supermarket will look to close?

PHP has a more secure rent roll I would think although you pay for that with a lower yield.

Dod

Fluke wrote:
Anybody else looking?

Well looked. I investigated and decided to buy but wasn't able to in my ISA so my purchase never happened, but I liked the concept (and still do). I know someone else that invested and has made some money (mainly income), with the attraction of RPI uplifts too, and without the downside of the cost of index linked gilts.

The move to online shopping doesn't worry me as the Directors are very aware of this trend and specifically look to invest in supermarkets capable of embracing this. After all the majority of online shopping ultimately gets picked off the shelves (with some out the back) so is dependent on physical stores. Stores with a meaningful density coverage, with warehouse/delivery vehicle capability, and good transport infrastructure links are preferred.

Fluke wrote:I've been looking at PHP as a possibility for my HYP and on my travels came across SUPR, not an HYP share but with a forecast yield of 5.3% and the potential for capital growth I'm tempted anyway. They buy and rent back supermarkets including distribution centres on long leases which according to the blurb produces long term, stable, predictable and inflation linked income.

https://www.supermarketincomereit.com/about

Anybody else looking?

I have a small interest, via my holding in TR Property. You may be interested in the comment in TRY's latest annual:

The one corner of the retail landscape to which these macro factors are far less applicable remains food. The UK is dominated by a small group of national operators. The existing store network is crucial to their online businesses. Even before the current crisis we liked the long income, covenant quality and operational necessity of key stores. Supermarket Income Reit (1.8% of assets) returned +13.4% in the year.


https://www.investegate.co.uk/tr-proper ... 00072920O/

Of course anyone can make an argument for this sort (or any other sort) of REIT but when there are a large number of REITS around and many with reasonable yields, I cannot see the attraction of buying a smallish REIT specialising in supermarket properties. Apart from anything else these properties are seldom suitable for any other trade should a tenant want to give up on one, and supermarkets themselves are not a great investment so why should their landlords be?

All might be well until the next supermarket shakeout; there will be one, it is only a matter of time.

I appreciate that my comments above also apply to for instance, the assets of PHP, but health centres have to my mind a much more secure tenant base than supermarkets although I am not arguing particularly in favour of PHP. As I said there are a large number of different REITs around.

Dod

Dod101 wrote:Of course anyone can make an argument for this sort (or any other sort) of REIT but when there are a large number of REITS around and many with reasonable yields, I cannot see the attraction of buying a smallish REIT specialising in supermarket properties. Apart from anything else these properties are seldom suitable for any other trade should a tenant want to give up on one, and supermarkets themselves are not a great investment so why should their landlords be?

All might be well until the next supermarket shakeout; there will be one, it is only a matter of time.

I appreciate that my comments above also apply to for instance, the assets of PHP, but health centres have to my mind a much more secure tenant base than supermarkets although I am not arguing particularly in favour of PHP. As I said there are a large number of different REITs around.

Dod

Really. Have you actually investigated the portfolio before making that comment?

I have, but to save you, or anyone else, having to look too hard, details are here.

https://www.supermarketincomereit.com/directportfolio

As a matter of fact, I have looked at the very website you very kindly provided the link for. And your point?

Dod

Dod101 wrote:As a matter of fact, I have looked at the very website you very kindly provided the link for. And your point?

Dod

Many of those brownfield sites have potential for development, and aren't solely for the supermarkets, so alternative users of the non-food variety are possible (in the event of the tenant wanting to give up, or following a "supermarket shakeup", the 2 scenarios you allude to).

Furthermore many are located in prime residential building locations which provide 2 comforts. Firstly local demand for supermarket products is likely growing, and therefore less likely to give cause for concern about tenants being either unprofitable, or wanting to quit the lease. Secondly the alternative use of the brownfield site is for housing, with these areas having local authority driven residential plans to meet a quota of new housing stock.

So my point is I don't think your claim "these properties are seldom suitable for any other trade..." is true.

But rather than squabble, others considering such an investment can now do their own research to see and make their own mind up.

Indeed I am not into squabbling and of course you may have a point but this REIT is investing for supermarket rental income and it would need to turn itself into a property developer cum trader to capitalise on its asset base. I am not saying they would not do that but the main current attraction is as a REIT with its main (or sole?) tenants being supermarkets and so providing a steady rental income.

Dod

I appreciate that my comments above also apply to for instance, the assets of PHP, but health centres have to my mind a much more secure tenant base than supermarkets although I am not arguing particularly in favour of PHP.

Indeed, I had a minor niggle about PHP with the current trend towards online/phone appointments.

I investigated and decided to buy but wasn't able to in my ISA

I was intending to do the same, what was the reason, something to do with it being on the 'specialist fund segment'?

Being unable to buy in an ISA must be broker-specific, as SUPR certainly qualifies for ISA (&SIPP) purchases.

GrahamPlatt wrote:Being unable to buy in an ISA must be broker-specific, as SUPR certainly qualifies for ISA (&SIPP) purchases.

Thanks yes I thought it must be something like that.

Fluke wrote:

I investigated and decided to buy but wasn't able to in my ISA

It seems my broker mis-labelled the equity at its IPO. They weren't interested in changing it (or more probably the person I spoke to didn't have the inclination to raise the issue up the line). I didn't have the inclination to spend any more energy arguing about it.

I hold SUPR in my portfolio of REIT's and it held up better than any other apart from PHP in the March downturn. I am currently disposing of my portfolio of REIT's as they failed to do their job and provide some form of defensive cover but SUPR will be the last one I sell

shetland wrote:I hold SUPR in my portfolio of REIT's and it held up better than any other apart from PHP in the March downturn. I am currently disposing of my portfolio of REIT's as they failed to do their job and provide some form of defensive cover but SUPR will be the last one I sell

What job have they failed at? You seem to be doing a lot of selling. Can I ask what you are buying in lieu?

Dod

I built up a portfolio of 10 REIT's to provide a defensive element to my portfolio across a wide range of sectors but avoiding big retail. When the crash came most fell as much if not further that equities and IT's and OEIC's. The exceptions being CSH, PHP and SUPR. I have since sold CSH and PHP. Most of the others I will sell either when they return to pre Covid levels or my patience runs out. SUPR is one of the better holdings. THRL should do better than it has given it owns care homes. RESI surprises me that it doesn't do better considering it is on a yield of 5.5% and a discount of 14.5%. CSH, in a similar market sector, yields 4.8% and is on a premium of 2.3%. Plenty of scope for a re rating of RESI I think.

As to what I bought, in March I gough into BG Global Discovery, BG Positive Change and MNKS. All of which have done exceptionally well.. I am transitioning to a portfolio based around global IT's and OEIC's

Hi Shetland
Thanks for your prompt response. I suppose it depends what you are looking for. I am primarily looking for income but I hold some capital/growth shares as well, so I might just take a look at one or two of your REITs. I hold Segro which has done very well on the capital front with a decent yield and is another REIT of course. I have no interest in the likes of B Land or Land Securities though.

Dod

Fluke wrote:I've been looking at PHP as a possibility for my HYP and on my travels came across SUPR, not an HYP share but with a forecast yield of 5.3% and the potential for capital growth I'm tempted anyway. They buy and rent back supermarkets including distribution centres on long leases which according to the blurb produces long term, stable, predictable and inflation linked income.

https://www.supermarketincomereit.com/about

Anybody else looking?

I recently came across and have bought SUPR., and have only just spotted this thread. Thanks for highlighting it.

Point taken about SUPR buying quality UK supermarket sites and specifically "omnichannel" sites, with upward only rent reviews. I like that type of site, and also the Big Box type (I also hold WHR and ASLI), as they concentrate on online shopping distribution as opposed to high street retail.

SUPR current SP Yield: 5.45% SP: 106.95

i've looked at this company, one thing that's contradictory about their strategy is that they believe online will grow, so position their supermarkets towards online fulfilling supermarkets. however, supermarkets lose money in every delivery, and it's unclear whether they will ever make money doing it. aldi and lidl don't bother because they know it's a loss making exercise.

so if you believe online will grow, won't this reduce supermarket profitability over time and therefore the covenant? i.e. shift sales from their most profitable route, to the least?

from where i stand, the future model of grocery is smaller, high volume stores like lidl and aldi with lower prices. massive stores with 40k product lines are struggling to achieve the same returns.

The problem with SUPR is if they stray too high above their NAV (101p as at 30th Jun'20) - perhaps now nearer 103p) they will inevitably conduct another placing. The last one in Oct'20 was for 192m shares @ 104p; and that followed 136m @ 103p in Apr'20.

I suspect they'll have their Interims next week; and wouldn't be at all surprised if they took their pitcher to the well yet again.

The 5.4% yield at 108p is certainly attractive; but capital gain limited IMO.

Better opportunities and better yields elsewhere in the REIT sector.