AIC ALTERNATIVES SEMINAR 2019 - LONDON1OTH OCTOBER 2019

PROPERTY EQUITIES: REAL ESTATE EXPOSURE WITH LIQUIDITY

Agenda

2

Section Page

1 Property as an asset class 5

2 Supermarket Income REIT (SUPR) 14

Presenting

Supermarket Income REIT plc

Registered Office:7th Floor9 Berkeley StreetLondonW1J 8DW

Contact

Ben Green

Principal – Atrato Capital,Investment adviser to Supermarket Income REIT

Telephone: +44 20 3790 8087Email: contact@atratocapital.com

www.supermarketincomereit.com

Ben has over 20 years’ of experience structuring and executing real estate transactions. He has completed more than £4.5 billion of sale and leaseback transactions with occupiers including Barclays, the BBC and Tesco.

Ben qualified as a lawyer in 1997 and began his career at Wilde Sapte and Linklaters LLP. He left law in 2000 and has since spent his banking career at Barclays, Lloyds and Goldman Sachs where he was Managing Director, European Head of Structure Finance.

3

Property as an asset class

4

Why it’s still ok to own (most of) this asset class now Real estate is attractive for two reasons:

Fundamentals1

Income stream with a capital kicker

Rental growth

Yield comparison (margin over fixed income)

Tenant demand improving (ex non food retail)

Lack of supply of new space(non existent development cycle 2008-2014)

• NAV• Earnings growth• Attractive debt cost

Valuation2

5

Fundamentals of real estate: Historical high and secure income

MSCI UK All Property Total Return Breakdown

-30%

-20%

-10%

0%

10%

20%

30%

40%

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019YTD

Income Return All Property Capital Growth All Property

Source : BMO Global Asset Management, MSCI. Data as at 23.05.2019

6

Income – still growing

BBB yield vs. EPRA dividend yield

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%

2013 2014 2015 2016 2017 2018

Yield SpreadFTSE EPRA Nareit Developed Europe Index Dividend YieldBloomberg Barclays Euro Corporate 500 - BBB ISMA Yield To Worst

Potential benefits of listed real estate

• Liquidity• Diversification• Low holding cost• Fractional ownership• Best assets and management• Access to capital markets

…and critically

Real Estate Securities = Real Property

Facility 2018 2019 2020

Earnings yield* 5.3% 5.5% 5.8%

Dividend yield* 4.0% 4.1% 4.3%

Yields are not a guarantee of future performance and should not be relied upon for any investment decision. *The above table shows the average yields of all companies within our investment universe according to BMO Global Asset Management’s internal company models Source : BMO Global Asset Management. Bloomberg. Chart data as at 01.05.2019. Table data as at 23.05.2019

.

7

Real estate securities = real property

Increasing correlation of FTSE EPRA Nareit UK (property shares) vs. MSCI UK Property Index over longer holding periods

0.33

0.53

0.64

0.73

0.77

0.75

0.89

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

1 Month

3 Month

6 Month

1 Year

3 Year

5 Year

10 Year

EPRA UK and IPD 6-month forward

Source : BMO Global Asset Management. Data as at 13.05.2019

Past correlations are not indicative of future correlations.

8

Open-ended funds…..at risk

Source:; 1 Citywire – 27 February 2019; 2 Investment Europe – 1 April 2019; 3 Financial Times – 11 February 2019; 4 IPE – 8 October 2018; 5 Money Week – 20 February 2019; 6 IPE– March 2006

An open-ended fund dilemma (IPE - March 2006)The conservative world of German open-ended real estate funds is in disorder. In the past few months three funds have had to close down temporarily as a result of a lack of liquidity. One of the funds is managed by a subsidiary of Deutsche Bank and is one of the oldest and largest funds in Germany. What happened?6

FCA unveils plans to reform UK's open-ended real estate funds4

Planned ban on open-ended property funds will hit Germany hard, warns trade bodyBerlin’s proposal to prohibit launching new open-ended property funds and property Spezialfonds, as part of implementing European-wide plans to regulate alternative products will hit German investors hard, cautions the national fund trade body.2

Open-ended property funs risk suspensions within weeks, warns Fitch1

9

TR Property Investment Trust - Track record

Past performance is not indicative of future results

Source : BMO Global Asset Management. Data as at 21.05.2019 Benchmark: Prior to 01.04.2013 FTSE EPRA Nareit Developed Europe Index (Net, GBP). Prior to 01.04.2012 FTSE EPRA Nareit Developed Europe Index (GBP). Prior to 01.04.2007 S&P Citigroup European Property Index. Prior to 01.09.2001 FTSE Real Estate index.

Long Term Track Record - Capital Only

1 Year 3 Year 5 Year

TR Property Investment Trust (NAV with Income) 3.5% 37.3% 84.0%

FTSE EPRA Nareit Developed Europe Capped Index (Net, GBP, Total Return) 0.0% 24.0% 55.6%

0%

200%

400%

600%

800%

1,000%

1,200%

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

TR Property Investment Trust (Capital Only NAV) FTSE EPRA Nareit Developed Europe Capped Index (Net, GBP, Capital Only)

Standardised Track Record – NAV with Income

10

TR Property Investment Trust - Dividend history

Past performance is not indicative of future results

Source : BMO Global Asset Management. Data as at 30.05.2019

0

2

4

6

8

10

12

14

96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19

Penc

e Pe

r Sha

re

Interim Final

• FY19 13.5p (10.7% increase on FY18)

• Dividend increase 2.3x since March 2009

• Fully covered

• 10 year compound annualised growth rate 8.9%

11

Positive asset sentiment

Investment Themes – “sheds, meds and beds”

Source : BMO Global Asset Management and Jefferies equity research (April 2019)

Reasons to be cheerful…….

12

• Real estate equities earnings yield 5.3% (FY18)

• FY19 forecast 5.5%

• Property is an income stream linked to economic growth not a fixed income stream

• If cost of debt rises and that is a consequence of economic growth then rental growth will follow

Get your income from real estate not corporate bonds

Source: BMO Global Asset Management. Data as at 13.05.2019

13

Supermarket Income REIT

14

Last mile grocery fulfilment in the UK

Mission critical omnichannel stores Strong trading track record

Large flexiblesites

RPI linked rents

Long leases with no breaks

Highly specific investment strategy – cherry picking assets

This is a target dividend not a forecast. Dividends are subject to quarterly board approval. Target based off 5.80p FY19/20 dividend forecast and share price at close 18/09/2019

5.5% Dividend target

Increasing with RPI

Long term capital growth

106

41

25

12 10

109

48

34

17

9

0

20

40

60

80

100

120

Supermarkets Convenience Discount Online Other retailers

£Bn’

s

2019 Value (£bn) 2024 Value (£bn)

Investing in the future model of UK grocery Omnichannel stores combine supermarkets (the most dominant channel) with online (the fastest growing channel)

15

74%

26%

In-store fulfilment CFC discribution

74% of online grocery orders are fulfilled in

supermarkets (2)

(1) Source IGD 2019(2) Atrato Capital, IGD, Retail Gazette sales data from Tesco, Sainsbury’s, Asda and Ocado

IGD Channel forecasts 2019 - 2024 (1)

16

Last mile grocery fulfilment in the UK

Tesco’s online distribution network (1)

• In-store fulfilment (337)• Online only (6)

90% of Tesco, Sainsbury’s, Asda and Waitrose online grocery orders are fulfilled in-store (2)

(1) Based on Atrato Capital research, www.maps.espatial.com (2) Atrato Capital research IGD, Retail Gazette and Tesco, Sainsbury’s, ASDA and Ocado websites.

Omnichannel stores have optimal characteristics for last mile fulfilment• Larger full range stores - urban warehouse• Situated in population centres – key for last mile

logistics

• Modern flexible buildings operating multiple models –instore, home delivery and click and collect

Online only fulfilment focused on M25 area• London is poorly served by supermarkets – floorspace

is 30% below national average (2)

• Population density required for online only stores - 5.6 million people within 60 mins of Tesco Croydon online only facility (1)

Sainsbury’s online distribution network (1)

• In-store fulfilment (118)• Online only (1)

Online opening dates2016: Bromley

Online opening dates2009: Croydon

2009: Aylesford 2010: Greenford

2013: Crawley 2013: Erith

2014: Didcot

The shift to omnichannel retailing

17

Alibaba launches TMALL Supermarket selling grocery via

its network of distribution centres

Alibaba Launches physical supermarket Hema, combining online

and offline shopping

2012

2015

88 Hema stores opened in 2018 -plans to open a branch in every Chinese city with over 1 million

residents

2019

Move to omnichannel

2017

Marks and Spencer trial online food delivery service in London and

Reading

Move to omnichannel

2019

M&S acquires 50% of Ocado UK grocery business for £750m

Walmart commences testing on home delivery service, not until

2014 is click and collect launched

2019

2011

Walmart announces $11bn US store investment:

• 20+ new 125,000 sq ft stores• Online grocery pickup expanded

to 1,000 further stores• Self service pick up towers

expanded to 500 stores

Move to omnichannel

Move to omnichannel

Move to omnichannel

Amazon moves from clicks to bricks with $13.7 billion Whole Foods

acquisition

Amazon launch Fresh, selling and delivering grocery through its

fulfilment centres

2007

Morrisons and Amazon expandsame day, instore pick offering to

further 5 UK cities

2017

2019

Move toomnichannel

Move to omnichannel

Move to omnichannel

5.2

2.5

1.5

3.0

4.5

6.0

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Yiel

d (%

)

Supermarket NIY Tesco Corporate Bond - Dec 2029

Supermarket valuations have decoupled from bonds

18

Historical performance of supermarket yields and Tesco corporate bonds (2029) (1)

(1) Source MSCI IPD and Thomson Reuters.

2.7%Spread

Supermarket leases offer one of the cheapest sources of RPI

19

4.3

5.2

1.4

(2.6)(3.0)

0.0

3.0

6.0

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Yiel

d (%

)

Supermarket NIY UK gilts 2035

Historical performance of supermarket yields and UK index linked gilts (2035) (1)

7.8%spread

(1) Source MSCI IPD and Thomson Reuters.

2.9%spread

4.0

5.0

6.0

7.0

8.0

9.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Net

initi

al y

ield

(%)

Supermarket UK Commercial Property Distribution Warehouse

Supermarket yields offer value vs other UK property

20

MSCI Yields 2004 -2019 (1)

MSCI Net Initial Yields June 2019Supermarkets 5.2%Distribution warehouses 4.7%UK Commercial property 4.6%

(1) Source MSCI IPD 2019

108

100

95

85

95

105

Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19

Shar

e pr

ice

(reb

ased

100

)

SUPR.L FTSE All Share Total ReturnFTSE EPRA Nareit

21

Share performance

Relative share price performance for the year

(1) Bloomberg 2019. Trading volumes monthly since IPO

8.0% Total Shareholder Return

SUPR ordinary shares daily traded amount – 4 week rolling average

300% increase in traded volume

Trading volume – 4 week rolling daily average since IPO

90k

425k

100

200

300

400

500

Jul 2017 Nov 2017 Mar 2018 Jul 2018 Nov 2018 Mar 2019 Jul 2019

Num

ber o

f Sh

ares

000

s

Trendline

£26 psft real rent

£15 psft real rent

£9 psft real rent

Outline returns profile

22

Rent RPI uplifts Sell at ERV of £27 psft (2) 7.5% IRR

Sell at ERV of £45 psft

Sell at ERV of £15 psft 6.0% IRR

10.0% IRR

=

=

=

+ +

Illustrative IRR profile from contracted rents plus different ERV assumptions (1)

(1) Assumptions: Single property circa £2.6m annual passing rent, £50m purchase price, 19 years WAULT, 3.2% annual RPI growth and sales proceeds equal to 5% exit yield assuming various ERV rents psft as per above. Includes leverage at 40% LTV assuming 2.4% annual finance costs. ERV = estimated reversion rent value on expiry. (2) Average passing rent for the portfolio FY 2018/19

There is no certainty that these illustrative projections will be achieved

23

IMPORTANT NOTICE

The information provided in this Presentation is for background purposes only and may be materially updated, completed, revised or amended without notice. Neither the Company nor anyone else is under any obligation to update or keep current the information contained in this Presentation. No reliance should be placed for any purposes whatsoever on the information contained in this document or on its completeness. No representation or warranty, express or implied, is given by or on behalf of the Company or any of its directors, officers, employees, advisers, agents or any other persons as to the accuracy, fairness, completeness, verification or sufficiency of the information or opinions contained in this Presentation.

Statements contained in this document, particularly those regarding possible or assumed future financial or other performance, industry growth or other trend projections are or may be forward-looking statements and as such involve risks, uncertainties and factors beyond the Company's control. Actual results and developments may differ materially from those expressed or implied by these statements, depending on a variety of factors. Historic performance achieved in relation to properties or securities in the past is not indicative of future performance. No representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any projections, targets, estimates or forecasts and nothing in this Presentation is or should be relied on as a promise or representation as to the future. No statement in this document is intended to be a profit estimate or forecast.

AIC ALTERNATIVES SEMINAR 2019 - LONDONAgendaSlide Number 3Why it’s still ok to own (most of) this asset class now Fundamentals of real estate: Historical high and secure incomeIncome – still growingReal estate securities = real propertyOpen-ended funds…..at riskTR Property Investment Trust - Track record TR Property Investment Trust - Dividend historySlide Number 11Reasons to be cheerful…….Slide Number 13Highly specific investment strategy – cherry picking assets Investing in the future model of UK grocery �Omnichannel stores combine supermarkets (the most dominant channel) with online (the fastest growing channel) Last mile grocery fulfilment in the UKThe shift to omnichannel retailingSupermarket valuations have decoupled from bondsSupermarket leases offer one of the cheapest sources of RPISupermarket yields offer value vs other UK propertyShare performanceOutline returns profileSlide Number 23