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The Reit owns a portfolio of nine supermarkets across England and Scotland, which are let to blue-chip retailers Tesco (TSCO), Sainsbury’s (SBRY) and Morrisons (MRW). The weighted unexpired lease term (WAULT) of the portfolio was 18 years at the end of December and all properties are let on the basis of annual upward-only retail price index-linked rent reviews. Annual rents rose an average 2.7 per cent during the first half half and the Reit paid a dividend of 2.9p a share for the period. 

The balance sheets of the company’s tenants also look to be in good shape, with all three having relatively low levels of debt, which have gradually fallen over the past five years. Trading has also improved across the supermarket sector, buoyed by grocery sales that have proved more resilient than non-food products. 

Admittedly, online grocery shopping is taking share and is forecast to account for 7.7 per cent of the market by 2024, compared with 6 per cent in 2019, according to grocery research and training specialist IGD. Discount retailers are also muscling in on the big four which means IGD expects annual sales falls of 0.2 per cent to 2024 for hypermarkets. Hypermarkets are defined as shops with over 60,000 square foot of space, which is where Supermarket Income Reit's portfolio is positioned. However, the group has been canny in its pick of hypermarkets to back by acquiring and letting properties only to supermarkets that allocate part of the space to online fulfilment.

Valuations seem to be holding up, with an increase in the portfolio's yield (a rising yield reflects falling property valuations) from 4.9 per cent to 5.0 per cent simply reflecting the purchase of two properties on a higher yield than the average at 5.2 per cent. The company is currently considering the purchase of a minority stake in a portfolio of  26 Sainsbury's supermarkets.