Early this year, our Fund acquired a Tesco Superstore in Manchester (UK) for GBP 28,600,000 using a financing facility provided by Abu Dhabi Islamic Bank. In order to manage its single-asset concentration risk, the Fund issued 5 years redeemable participating shares linked solely to the performance of the asset and paying a 7%p.a. monthly distribution. The value of the shares is directly linked to the value of the underlying property, and therefore, in addition to the monthly cash distributions, there is a possibility of capital gains over the investment period.Prior to their maturity, the shares can be redeemed based on their estimated value published daily by the Fund, however redemptions will be accepted only if there are matching subscriptions, or if the Fund has spare liquidity to by them back. The shares were fully underwritten at issuance, however we now have an investor in need of liquidity offering the possibility to acquire the shares at a price which is slightly below the initial issue price. The shares are denominated (and hedged) in USD and the minimum investment is USD 100,000.The assetIf you wish to learn more about this property, you can follow this link to our Youtube channel where we have uploaded a short promotional video:https://youtu.be/IOtn2DptOtAIn essence, the property is a modern supermarket servicing both traditional clients and on-line sales. The property has been adapted to allow so called “click & collect” sales where customers can order online and then pick up their groceries from a dedicated back entrance. The property has also its own fleet of minivans to deliver groceries at home. The lease on the property is very long, with almost 16 years remaining and no breaks. Rents are reviewed every 5 years in line with inflation, with the next rent review due in March 2022. As you know, inflation in the UK is running very hot at the moment (3.2%) boosting the next rent review in March which will incorporate 5 years of accumulated inflation.The marketRecently I held a webinar with Ben Green, the CEO of Atrato Capital who manages the Supermarket Income REIT to discuss about market trends. You can watch this webinar on our Youtube channel:https://youtu.be/bNqPFuwlCU4Following the recording, Supermarket Income REIT published their annual results and provided an interesting overview of the market. You can watch the recording of the webinar here:https://webcasting.brrmedia.co.uk/broadcast/612f8b9312f0cb436ea68c6b/61547230d1ae181ef2adfec4Below I am going to share a couple of slides they have presented which really show what is happening to the market.Image_2021-09-29_21-28-35.pngSales of groceries have increased 9% over the last 2 years, a number which far outstrips the growth of the economy during the same period and which indicates a shift of lifestyle of individuals who are now spending more time at home and less in the office (where they were more likely to eat outside). More interestingly, online sales have grown 85% over the last 2 years, with deliveries made predominantly from existing stores (as opposed to pure logistics centers). It seems, therefore, that the old stores are the perfect urban logistic asset to reach customers; after all, these properties were located in strategic locations to be easily reached by customers.Image_2021-09-29_21-33-32.pngYields of acquired properties are also declining, with some the the latest transactions taking place at around 4% entry yield.Despite this compression, the property yield is still 2.2% above the average interest rate paid by supermarket operators on their bonds providing an attractive arbitrage opportunity when we factor the growth of income linked to inflation indexation. Image_2021-09-29_21-36-35.pngSupermarkets have become a target from Private Equity investors who are attracted by the resiliency of the income they generate and the rich real estate holdings. Given that recent accounting changes have made unattractive to perform sales and leaseback, it is unlikely that these takeover will result in a flood of properties in the market. Rather, we might see continued buy back of stock on lease providing a constant source of liquidity for investors who wish to exit an asset. The shortage of properties, compounded with the security of income, should continue to underpin their capital values, making them one of the most appealing long income propositions. ConclusionWe believe our investment in this Tesco supermarket will generate a secure income and and appreciate in value over time; we also believe that the asset should be sufficiently liquid if we decide to sell it in future. A co-investment in this asset should be attractive to sophisticated investors who are looking for a high degree of current income and capital preservation, and are prepared to take the increased risk of an exposure to a single tenant and a single property, as well as, the higher degree of risk associated to the use of leverage. Should you wish to obtain more details about this investment, please get in touch.

Chancery Lane

Westminster, London

A boutique development of 14 residential apartments located in the prestigious legal district in Central London.

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For more information or to speak with our Investor Relations Team at +9714 363 5600 or +9714 424 2700