Supermarket Income REIT plc (SUPR) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Supermarket Income REIT plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received in the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand over to Steven Noble, Chief Investment Officer. Good afternoon, sir.

Good afternoon and good afternoon, everyone. Thank you for joining. My name is Steven Noble. I'm one of the co-founders of Atrato Capital and currently CIO of Atrato, and I'm joined by Robert Abraham, who is the Managing Director for the Supermarket Income REIT fund. I just wanted to start by giving you an overview of the 3 core pillars behind the investment strategy of the Supermarket Income REIT fund. The first of those is long inflation-linked income. We target long leases. The average duration of a lease in our portfolio is 14 years. And within that, we also target progressive rental growth through contractual uplifts to our rents, of which 80% is indexlinked. The second core pillar to our investment strategy is around omnichannel stores or what we like to view as future-proofed stores. The stores that we target not only fulfill in-store sales, but they also play a key role in the fulfillment of online sales of our tenants, and Rob's going to take you through that strategy in a lot more detail shortly. The third pillar of our investment strategy is just the nature of the sites that we acquired. One of the benefits of acquiring Supermarket properties is that we get a large land footprint with our assets. Currently, on average, our site size is around 8 acres, and that gives us a lot of flexibility to respond to the changing needs of our tenants and how they want to use the property, most recently, of course, investment in online fulfillment and additional distribution docks and fulfillment capacity. Just to give you an overview of the grocery sector before we get into more detail. I mean, grocery market is growing, annualized 8.8%, and that equals robust income for us. Now, Supermarket property is not immune from the macroeconomic environment, and we can take you through the impact of the movement in property yields in our overall portfolio. However, we have attractive levered returns and we have strong balance sheet flexibility. And again, we'll take you through this shortly. Just starting with an overview of the grocery market. In another [ world ], the uncertain world, U.K. grocery market continues to go from strength to strength. Monthly annualized store volumes are up 0.8%. And this is, of course, having a positive impact on the financial performance of our tenants. The Q3 update. Cash flow guidance from both Tesco's and Sainsbury's shows how the stronger volume trends, together with momentum behind cost reductions, is driving material financial growth. [ Abated ] cash flow generation is resulting in increased investment in their own real estate, as seen through their activity in the property market, which I will take you through shortly. The wider economic headwinds, strong growth [indiscernible] of the grocery market over the last 5 years. Over this period, U.K. grocery has recorded persistent growth, increasing by GBP 33 billion to a GBP 222 billion market as of December 2022. Now our specialist invest strategy is dedicated to this growing market, which is nondiscretionary spend sector, with growth from 3 powerful drivers mainly in [ working ] from home, inflation and population growth. In addition, we are benefiting from the alignment of our investment strategy to the powerful structural changes in the way in which grocery is fulfilled. And let me take you through that in detail now. On this graph, we show how that GBP 33 billion of growth is distributed by fulfillment format. As you can see, omnichannel is the largest growth format in U.K. grocery. Over 80% of online grocery orders are fulfilled through an omnichannel supermarket, and that number is growing. Our deliberate decision to build an investment portfolio of omnichannel stores, provides a long-term structural driver to our ERV growth, thereby providing us with the opportunity to capitalize on the growth that we're seeing in our occupational market. And Rob's going to take you through an example of an omnichannel store in a bit more detail shortly to bring it to life. As you can see in these tables of sellers and buyers, over the last 5 years, supermarket transactions has totaled over GBP 8 billion. This rotation of supermarket property into long-term specialist investors, combined with the acquisition activities of the operators on their own leasehold property is leading to a net contraction of supply, which we believe is favorable to our long-term investment yields. Now it's no surprise, investment volumes in our sector have materially reduced in 2022, consistent with other property asset classes. However, our market is unique given the tenant's activity in this investment market. So our investment market looks materially different when we add the operator's own activity. Now it's no surprise to us that our tenants are the biggest buyers of their own stores, given the long-term value in supermarket property. 2022 shows the extent of this activity as the operators recycle, growing free cash flows back into investment in their own leasehold property. Let me take you through investment yields now in a bit more detail. But firstly, I'll just take you through the total size of the market. So as you can see here, we break down U.K. grocery property. In total, is around GBP 85 billion. Now within that, a large majority of stores are owned, freehold by the operators. So the addressable leasehold market is around GBP 30 billion. As I mentioned earlier, with the buyback activity of the operators, this market is shrinking and that will be favorable to our yields. Today, Supermarket Income REIT has GBP 1.6 billion of gross assets. Now let me take you through those yields. On this graph, we show the MSCI yield series for supermarkets, all property and logistics. Whilst the supermarket index is a broad series of assets, not fully reflective of our long income omnichannel focus, it does highlight the relative correction in yields we've seen since September. On the right of this graph, you can see that Supermarket yields have rebased faster than any other sector with yields of 5.7% or 90 basis points wider than all property. Now what's particularly noticeable here is that, at a time when the prospects for our occupational market is at its strongest level, Supermarket investment property is at its cheapest level. And on the left, when we contrast this to the 2009 global financial crisis and the relative value difference to all property, you can see supermarkets were one of the most expensive asset classes. But again, in contrast today, supermarkets are one of the cheapest. Our investment market has never looked more compelling, and we believe, represents one of the most attractive asset classes in the U.K. property. Now for those of you who know us well, you'll know, we produce our own yield series for long-lease Supermarket property. Our rules in formulating this index have not changed. As a reminder, we can [ buy ] this yield series based on trailing transactions within each 12-month period and which are representative of our investment market, being transactions which have over 10 years of unexpired lease terms, benefiting from index-linked or fixed uplifts. Now not surprisingly, given the economic backdrop, transaction yields have moved out to 5.6%. On average, our portfolio is valued at 5.5%. As we showed earlier, the correction to yields does, however, present a real opportunity for us to acquire investments at a more attractive entry point. On this graph, we contrast the historical IRRs to the current implied IRR following the rebasing to Supermarket investment yields, both on a levered and an unlevered basis. At current yields, supermarkets now provide over 200 basis point improvement, increasing from 7%, 8% levered IRR to 9% to 10% today, which we believe, provides a highly attractive return over the risk-free rate and comparable to other asset classes. In addition, we consider these returns to be even more attractive, especially when you consider the strength and quality of our underlying tenants. With the weakening economy, this quality factor has never been more important, providing a higher degree of income resilience. So in summary, despite the turbulence within the investment market, the attractive entry point, long-term, high-quality income makes Supermarket assets one of the most attractive asset classes in the U.K. property market. I'm now going to hand over to Rob, who will take you through our investment strategy and our portfolio in a bit more detail. Rob?

Good afternoon, everyone. So just to take you through our portfolio and our investment strategy in more detail. So first up here, we've got an example of what it is we target and we'd have mentioned that 93% of our portfolio is omnichannel. And this example here is Tesco Thetford which is the very first store that Super acquired, and this is a really strong training location for Tesco. You can see in the image on the left, we've highlighted the various areas within the store. So you've got the in-store shopping highlighted as item A, that's providing significant sales of GBP 49 million of that total GBP 70 million. But you can also see that the combination with the online generating significant sales. And it's the combination of all 4 of these elements of the store that gives total revenue for Tesco around GBP 70 million per annum, so a significant source of revenue. You -- there's still showing here benefit from the nearby center and also the immediately adjacent Kingsfleet development of 5,000 new homes. So, all of that provides a very strong trading Supermarket. And you can see there also, the large roof is ideal for a PV solar array. And this slide here, you may have seen us talk to in the past. It just gives a better explanation of why omnichannel is the winning method [Technical Difficulty] for the groceries. On the left here you've got Tesco's online distribution network, the blue dots being all of stores that Tesco do home delivery from. It's around 350 of those in total. And then the red dots are clustered around London. These are online fulfillment centers. So that's what -- these are online only. You may hear them referred to as dark stores. But the point being proximity to consumers is key. And on the right-hand side, you can see how that translates into lower fulfillment costs. So the stacked bar on the left, the CFC model, so this is akin to Ocado's fulfillment method. And you can see that the picking and packing cost is broadly comparable to that of omnichannel on the right-hand side, but the delivery cost is significantly higher. And the reason for that is the further distance to travel on average to consumers. So the average number of drops that Ocado can achieve in an hour is around 2 omnichannel stores by being closer to consumers, can achieve on average 4 drops per hour. And in some of the stores in our portfolio, that's as many as 6 drops per hour, and that just gets the average delivery cost down significantly. And therefore, the cost of fulfilling an order -- an online order through an omnichannel network is around GBP 9 per order compared with the Ocado method at GBP 4 per order.

Yes, this is a key insight into our investment strategy. What we're essentially [ targeting ] is all the blue dots in that map because of the power of the omnichannel format to the operators. As Rob said, grocery is incredibly difficult from a logistic, and hence, in that respect, you can see the groups use a distribution model or last mile fulfillment model using supermarkets because the cost is materially lower.

And this slide just really highlights that point. Am I coming through?

I'll carry on. So in here, you can just see an illustration of the power of the omnichannel model and just around the additional drop densities that are achievable using last mile fulfillment as opposed to big logistics units. And of course, to really understand this, this is the reason why Amazon acquired Whole Foods in the U.S., recognizing that, to be successful in online grocery, you need a distributed model of last mile fulfillment centers done through supermarkets. I'll now hand back to Rob, who I think mic's problems have been resolved.

Thank you, Steven. Hopefully, I'm back. So let's just highlight our portfolio here on this page. So we've grown the portfolio since IPO to now 50 supermarkets, handpicked stores. These have been compiled in individual acquisitions rather than portfolio deals. So it really is a unique portfolio that you couldn't replicate today. Weighting towards Tesco and Sainsbury as you can see on the left-hand side there with a highly diversified portfolio, both by tenant and geography. As I've mentioned, 93% of our stores are omnichannel and we've got a highly affordable average rent turnover of 4%. So just to take you through our income profile, and it's the combination of those highly affordable [ rents ], but also the mission-critical nature of our assets for our tenants and also the strength of our tenants. That means that Super's achieved 100% rent collection since inception. We also have highly contracted rental income with a 14-year WAULT. And we're also continuing to see rental growth come through with a 80% inflation-linked uplift for our rent reviews with a total rent roll now at over GBP 95 million. This slide just summarizes the breakdown of our rent reviews. So primarily, RPI-linked reviews at 73%. We do have some CPI, 18% open market. And the reason we have acquired more open market recently is because these reviews are uncapped, and we see an opportunity potentially to capture a greater share of inflation through those uncapped reviews over the long term. And then we just have a small portion into fixed uplifts.

And that's a key observation, you'll note at the start of the presentation, the growth we're currently seeing in the U.K. grocery market is exceeding the elevation in the rental levels because of our average cap. So in that respect, we are seeing additional under-rentedness building in this portfolio. And we're trying to capture that through a small increase in our overall exposure to open market rents, which, of course, [ we'll ] review by reference to the market rather than a [ formal ] inflation uplift.

So when we're targeting really strong trading supermarkets, we do sometimes also acquire adjacent non-grocery units that are complementary to the operation of the Supermarket. You can see on the page there, over 75% of these units are essential retailers that trade really well alongside the Supermarket, as I say. So the likes of Boots, can be quick service restaurants, take drive-throughs like Starbucks there. But we take a very conservative approach. So these are held at an 8.2% net initial yield in our valuation and represent less than 7% of the portfolio. And as you can see in the table on the right-hand side, it's a really diversified portfolio. So there's no single point risk, or exposure is diversified by sectors, tenants. And as I say, this is all about targeting really strong supermarkets, but sometimes in unlocking note, it comes with some non-grocery exposure as well. Just turning to sustainability. So on the left-hand side here, we've shown our EPC ratings in the portfolio, 84% A-C. But we're not just stopping there. So we're looking to continuously improve the sustainability of our assets. We've recently had Tesco enter into a 20-year PPA for a new solar -- rooftop solar array at one of our stores. And we've also agreed terms for EV charging at 8 sites and planning is underway for those. On the right-hand side, we're working towards net zero as well. So Super recently became a signatory of the Net Zero Asset Managers initiative. And then on the right-hand side, TCFD, the Task Force for Climate-Related Financial Disclosures. This relates to our reporting in our annual report. In September, we went to TCFD, but we are targeting full compliance ahead of the deadline in 2025. We're also working with specialists, so Anthesis, and they're involved in producing science-based carbon reduction target for Super. And related to that, we've also now, for the first time, started to receive carbon emissions data or energy consumption data, but from some of our main tenants, and we're working on expanding that to our full tenant base. And then also CEN-ESG have been appointed to develop Super's sustainability strategy further and perform a benchmarking exercise against peers. Turning now to our Sainsbury's Reversion Portfolio investment. So as a reminder, this is a combination of 3 years of hard work. The JV was formed in 2020 with Super taking a 12.75% interest in that portfolio, increasing to 51% in January in a series of transactions before finally being disposed of in full to Sainsbury's, which was announced earlier this month. And that's been a really strong performing investment for Super with a 1.9x money multiple and an IRR of 30%. It's a real value add there. But let me just take you through how we got there. So the initial investment by the JV was GBP 217 million into 26 Sainsbury's stores on short leases, but the value opportunity we saw here was in the strength of the stores, and we underwrote Sainsbury's long-term occupation of these locations beyond lease expiry. That was proven by Sainsbury's exercising its purchase options on 21 of those stores for over GBP 1 billion, and that deal was struck at the peak of the market with a net initial yield of 4.3% on those stores acquired. There were also 4 stores that Sainsbury's took new 15-year leases on, and there's one that is to be sold subject to vacant possession. The result of that is GBP 431 million of sale proceeds to Super. We've received the first tranche of that, and the second tranche is due in July. And just -- again, that's been really attractive returns to Super with a 1.9x money multiple and an IRR of 30%, in terms of how we replace the income that we've been generating of GBP 12 million per annum from the Sainsbury's Reversion Portfolio. Then there are options around how best to deploy the GBP 228 million of net equity received. Firstly, there are store acquisitions that could generate around GBP 13 million of income Secondly, just the repayment of debt, which at current rates, could save around GBP 11 million. And finally, share buybacks. And the Board is considering all of these options and their respective merits in deciding how best to use those proceeds.

I think that's back to me. So, to summarize, before we move into Q&A, the outlook for our sector. I mean, as we've taken you through the grocery market and how that's changed, we do believe this is a structurally supported sector. We are 100% dedicated to the U.K. grocery market. And the growth of that market has been persistent over the last 5 years, and that's been driven by core drivers that predominantly relate to increased working from home, growth in inflation as well as increasing population growth. Now for us, as a fund, we have highly contracted inflation-linked rental growth. As a reminder, our WAULT is 14 years, and 80% of our income is indexed-linked. Now on top of that, as Rob took you through, with the disposal of the Sainsbury's Reversions Portfolio, we do have a lot of liquidity that we can use to pay down debt, and of course, that gives us a really flexible balance sheet. And we also have a sustainable dividend. As a result of the hedging activity we undertook in our debt, 100% of our funding cost is now hedged until mid-2026. So in that respect, our dividend is sustainable. And on top of that, we do have attractive levered returns from future market transactions that we could pursue. As Rob also took you through with our optionality on the Sainsbury's Reversions Portfolio, that liquidity gives us options that we can consider to deploy both into new assets; two, to repay debt to maintain our balance sheet strength, or alternatively, we could look at share buybacks as an option. At that point, I will pause and we can go into a Q&A session.

Yes. Robert, Steven thank you very much for your presentation. [Operator Instructions] But just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via Investor dashboard. Robert, Steven, as you can see we received a number of questions throughout today's presentation. And if I could just ask you to read out those questions and give responses where it's appropriate to do so. I'll pick up from you both at the end.

Thank you. We can get straight into -- a really good question. First of all, that's come through -- I think, pre-submitted, just asking about banks, their appetite for Super and where we've hedged? I'm going to flip through a few slides, unfortunately, but it is worth taking you through this in detail. I'll probably take you quickly through this one. So yes, there is strong appetite for Super's credit and naturally so. I mean we've got very strong covenants. We're secured by property. So in that respect, there is a lot of banking appetite for us. We've always maintained a fairly large, well-diversified banking group. You can see here that in the last 6 months, we have refinanced as well as extending existing facilities. So right now, our total committed debt facilities stands at over GBP 850 million in total. It's also fairly well staggered in terms of maturity. We do outline here the majority of our various debts. For those of you who know us well, you'll know that we began the process of transitioning to an unsecured debt facility that was designed to take us into the bond market. We're still reviewing the bond market and the pricing that's available in the capital markets. Right now, it's not as attractive as the banking market on a secured or unsecured basis, but we keep it under review. And in terms of treasury management, I mean, we outlined here our kind of approach to treasury management, which was really designed to maintain our dividend. So as of September, this orange dotted line is the yield curve against SONIA. And you can see our approach to hedging was to really hedge out beyond the volatility period. If we look at how that graph has moved, you can see it has moved around a lot, but that was the benefit of one of us taking out a hedging policy to hedge 100% of our debt until around mid-2026. So in that respect, we're fully fixed. We fixed a finance cost of 2.9%. And of course, that makes our dividend sustainable. Another question just outlining our tenant exposure. Rob, do you want to take that one quickly and our exposure to Asda Morrisons?

Sure. So yes, our weighting is towards Tesco and Sainsbury's, so around 80% weighted towards those names. I think that will always be the case for us. There is a greater supply of Tesco's and Sainsbury's because they undertook the large scale [indiscernible] programs historically, but they're also 2 of the strongest covenants in this space to the most dominant operators. So for us, that is no bad thing. We have relatively low exposures to the likes of Morrisons and Asda. And for us, though, it really is about underwriting sites as grocery locations. So there is a role to play for other operators in our portfolio provided that these are strong trading omnichannel submarket locations. And history tells you that many of these sites have been grocery for 30, 40, 50 plus years and you may have seen a change in operator, but they continue to be grocery locations. And then it's just simply because the scarcity of these types of sites in strong locations with good catchments that are perfectly positioned for both in-store shopping and home delivery. That means that if you were to lose a tenant, you would have another willing to step in. But for us, yes, as I say, I think you can always expect us to have that weighting towards Tesco and Sainsbury's.

We've got a lot of questions coming in on the replacement of the JV income, the use of proceeds and whether we're considering share buybacks relative to where the share price is? I know we covered this in the presentation, but it might be worth just reiterating again, how we're thinking about that.

Yes. So for us, it's just comparing at the time where the relative benefits are of whether that's acquisitions. The example we've given here is potentially deploying a 6% net initial yield. So there are some value opportunities out there at the moment. And that would generate around GBP 13 million of income. Repaying debt, our long-term cost of debt is around 5%, so all-in cost that is. So that would save around GBP 11 million per annum. But then there is share buybacks, and that will be dependent on share price at the time relative to say, [ equities ] or where long-term debt costs look to be, but all of these options are on the table. It's kind of -- finally balanced at the moment, is how I'd describe it. And no decisions have been made. We will -- we do [ net debt ] rent options because we have revolving credit facilities, which we're able to freely repay. So in the short term, that there is no cash drag. And then it's a question of well, what is the right level of leverage for the fund to run at, going forward.

Just take one of the pre-submitted questions coming in around dividends, whether it's [ cut ], and the outlook for the dividend going forward? I'll just quickly jump to our P&L, which does outline the dividend cover. For the 6 months to 31st of December, it was at 98%. There's a small drag as we deployed the proceeds of the equity that we completed in the first half of the calendar year. However, if we looked at that on a look-forward basis or a pro forma basis, then that will be fully covered. And as I took you through earlier regarding our treasury management strategy, we have locked down 100% of our funding costs. So in that respect, when we look forward, without giving any one guidance, which I'm not allowed to do, we do have a high conviction that we can maintain our dividend cover. And of course, some questions around dividend growth going forward. Again, I can't provide you with a prediction, but the Board has maintained -- is committed to maintaining a progressive dividend growth level. And of course, Rob has taken you through our income profile and how that's linked to indexation subject to the cap. Another question coming in, Rob, which I'll hand over to you. Just a question around the 5.5% net initial yield, but we have 5.3% on the supermarkets portfolio, if we can explain that difference?

Yes, absolutely. So the 5.5% is our average across the total portfolio, including non-grocery, and 5.3% is our average Supermarket yield. There is a spread around that. Clearly, shorter leased overrented stores will be at a wider yield and we have -- some that are longer dated and depending on review basis that will be marked tighter, but that's simply the explanation of the difference between the 2.

We do have a slide, which I was trying to find, but we'll probably move on to the next question. Apologies, some of these are slightly repetitive. So I'm trying to pull out some different ones. Question on ERVs and how we're thinking about rental growth in the market. Is there a difference between entry and exit multiples? I could probably take the second one, Rob, but if you want to give an overview of what we're seeing in the occupational market on rents?

Yes. So the benchmark for operators in terms of rents is 4% rent to turnover. That's exactly in line with where Super's current portfolio is, as I mentioned earlier. So we see our portfolio is broadly rented. What we are seeing for operators at the moment, of course, particularly with higher inflation coming through, is that operator revenues are growing ahead at the store level, growing ahead of where we are seeing rental growth. So with -- our average inflation rent review is capped at 4%. We're seeing store revenues grow, in some cases, in the double-digits ahead of that. And that just means that rents are becoming increasingly affordable for our operators. And if anything, we think there's an element of under-rentedness building in the portfolio now as rents become a smaller proportion of that store's turnover. And as I mentioned earlier, that was part of the reason that we've selectively acquired some open market review stores because the potential for uncapped rent reviews there allows us to, in some cases, capture a higher proportion of that inflation. So it's a good hedge for us, but we see good tailwinds for market rental growth coming through.

And I think the second part of that question was around how do we model that? It's a fair point. So on the IRRs that we took you through, we do assume that these are consistent yields, i.e., market yields of around 5.5%. So yes, if there is compression in yields, then that IRR will increase. And at the same time, this IRR was modeled on the basis of our 4% cap. It doesn't assume that there's any premium in a reversion to market rents. It just assumes rent grows in line with inflation as predicted by the current inflation swaps curve that capped our average of over 4%. I will just run through a question on -- I'll probably hand this one back to you, Rob. What are we seeing in the investment market at the moment? And are there running assets coming onto the market itself?

So yes, I think the story at the end of last year was certainly a quieter quarter. We saw valuers moving. And in the case of our valuation yield, that was more sentiment based because there was a lack of evidence. We had quite a wide bid off a spread between where vendors were expecting to sell and where buyers were willing to buy. That gap has now narrowed. We've seen vendors' valuations catching up around what we are seeing now, is opportunities which are pricing broadly in line with the equivalent assets in our own portfolio. So that just gives us confidence that the current valuation is correct. And I did see a question around, do we expect further valuation weakness through this year? And as I say, there wasn't really anything equivalent to the quality of Super's portfolio trading late last year. That certainly seems to have changed. And very recently, we started to see some of the Tesco, Sainsbury's, longer-dated annual RPI review type stores coming to market. And as I say, they are closely aligned to where we have the equivalent stores marked in our portfolio. So no, we don't really see a justification for valuations to drift further this year. Steven's talked you through how the returns look attractive at these levels, and we think that just provides the support for market yield to stay around this level, even in light of higher debt costs. So yes, it was a conservative prudent move by valuers in December, but the market is certainly -- the evidence in the market we're seeing certainly seems to support where we have the valuation today. So we think we're at the bottom and it should be a story of growth from here.

Question from Greg, which I think relates to the rent reviews we announced this morning. Is there a lag on our inflation-linked rent reviews and are we capped at 4%? So yes, we are capped on average of 4%. And why 3.7% growth, not 4% given where inflation is right now? Yes, it is the lagged effect, Greg, coming through there. Obviously, some of our rents [ we ] would have reviewed earlier in the calendar year. So in that respect, we're kind of taking slightly smaller inflation-linked growth, but of course, catch up into next year, if inflation remains high. Another question has come in around share price performance and the current discount to our [ NAV ]. Obviously, we can't control the share price movement. It's obviously disappointed, but we do think that's incredible value at around the 7% yield of the share price. What's driving that? I think there's some nervousness in the market around, a, funding costs for property companies, and also more recently, a bit of nervousness coming from the U.S. around the banking market. So in respect we're not immune to the market sentiment. I guess, how we would communicate that is that, we've taken you through our hedging policy. And as a result of us hedging 100% of our debt, we have no variability to interest costs until mid-2026. So hence, we feel we're in a really good position when it comes to exposure on interest rates, and that protects the dividends. And then how do we think about the banking market? We took you through as well the appetite for the banks against our governance and to lend against this asset class. We do believe that this asset class is infrastructural. And in that respect, we are specialists at targeting property, which we believe is not only the future model of grocery, but also represents some of the best stores in the U.K. Another quick question, which I'll also take is, why did we appoint Goldman's as second broker during the year? It's a good question. Obviously, for those of you who know us really well, last year, we did transition away from the specialist fund segment of the market on to a premium listing of the FTSE. We're now FTSE 250 listed stock. We're also included in the EPRA/NAREIT index. So in that respect, our shareholder base has increased. We're now available to a diversified pool, including tracker funds. So the Board and us thought it was appropriate that we bring on a second broker and hence, the appointment of Stifel, who -- sorry, the appointment of Goldman's who will work alongside Stifel in a joint brokerage role. I think I'll just jump in for one last question before we wrap it up, which was a technical, just asking us Rob to explain the 36% growth in rents as published on our results RNS this morning versus the 3.7% rental growth we were talking about?

Yes. So good question. So the primary driver in that 36% growth is the acquisitions that we made during the period. So that has boosted the rent roll somewhat. But yes, in terms of average rent reviews in the period, on an annualized basis, they were coming through at 3.7%. So I mentioned earlier our average cap of 4%. We had some reviews in the first half at 3.7% average on an annualized basis.

Perfect. Sorry, [ after you ].

No, I was just going to say I was going to squeeze in one more question, but if we're up, Alessandro, we can call it there.

No, feel free to answer that question, and then I'll come in after that.

No problem. So it was just a question around what will happen to NAV following the SRP? I think as we announced this morning, our NAV is 92. The valuation of the Sainsbury's reversions portfolio obviously reflected the decision of Sainsbury's to buy back their stores. So in that respect, we think most of the SRP value is reflected in the NAV that we announced this morning. And I believe that was a nice comment here, by the way, that -- from Tim that given our current yield is 7%, it should be a slam dunk. Thank you. We agree. And I think that's probably it.

Perfect. Robert, Steven, thank you very much. I think you've addressed the questions you have from investors. And of course, the company will review all the questions submitted today, and we'll publish those responses on the Investment Company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to you both, Steve, could I just ask you for a few closing comments?

Yes, I can do. One of the key things we were keen to get across this morning is obviously the real juxtaposition between a, the performance of our tenants and the grocery market overall as an occupier sector and the performance of the property market right now. Now obviously, there's different drivers between those 2, but we do believe that the performance of the grocery market is in stark contrast to the property market. And in that respect, we expect and hope that at some point those 2 really will result in equilibrium, and that's what really differentiates us as an investment fund. We do believe this asset class is an exceptional value right now. And in respect to that, we also believe that there's a lot of tailwinds behind our occupational market that will feed through into our long-term returns and growth.

Steve and Robert, thanks once again for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Supermarket Income REIT plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.

Thank you.