The issue price of 121 pence per share is a 4.3% discount to the closing price on 6 April. There will also be a retail offer at the same price through the PrimaryBid platform.
The trust said that about £150m of assets were under exclusivity and additional assets worth about £120m were in “advanced due diligence”. There was also a further pipeline worth about £440m.
Nick Hewson, chair of the company, noted that 85% of the company’s existing rental income is directly linked to growth in inflation.
“Historically there has been a high degree of correlation between inflation and food prices, which means that the ability of our grocer tenants to pay the rental income remains sustainable in the long term,” he added.
The statement issued today (7 April) added that following the trust’s move to the premium segment of the stock exchange, it anticipates it will be eligible for inclusion in the FTSE UK and FTSE EPRA NAREIT Index Series at the Q2 2022 index review.
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Death of ‘dark stores’
Atrato Capital’s Steven Noble and Rob Abraham, managers of the trust, spoke to Investment Week at the end of March about the current market and their ambitions for growth.
The pair focus on omnichannel supermarket stores, or those that are built to operate both in store and online grocery operations.
They noted that despite the uptick in online shopping throughout the pandemic, Sainbury’s closed its only “Dark Store”, or one that is purely for online fulfilment, last year, and there has not been one built since 2016.
The managers explained the main cost of online supermarkets is the distribution, so having an omnichannel can mean supermarkets are close to their consumers, rather than a dark store where you have much further to travel.
When asked about the opportunities to build more stores, the managers said that up until about 2015 there had been a “space race” among the groceries as they looked to build more stores. However, after that there was “rationalisation” and while some are “returning to growth,” they are being more “scientific and selective” in their approach.
“There’s a huge amount of value in in the well-located 100,000 square foot stores because they are able to do online fulfilment,” they said. “The Big Four [Asda, Tesco, Sainsbury’s and Morrisons] have got national coverage now, so it is just in those locations where they are not adequately covered, and they have not got market share”.
When asked how big they were willing to grow the trust, the managers said they would look to be about 10-15% of the omnichannel segment they target, which would put them at roughly £3-5bn in assets under management.
“It is a very targeted investment strategy for us,” they said. “That is eventually capped at what we think we can be in terms of the overall markets.”
The trust is trading at a 11.8% premium, according to Morningstar.