Good afternoon, ladies and gentlemen, and welcome to the Supermarket Income REIT plc Investor presentation, and apologies for our short delay. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Just please simply type in your question at any time and press send. The company may not be in a position to answer every question it receives during 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, we would like to launch the following poll, and if you give it your kind attention, we would be most grateful. Now let's hand over to Chief Investment Officer, Steven Noble. Good afternoon, sir.
Thank you. Good afternoon, everyone. My name is Steven Noble, Chief Investment Officer and co-founder of Atrato Capital. Atrato Capital is the investment advisor to Supermarket Income REIT, which of course is the UK's only real estate investment company focused exclusively on investing in UK supermarket property. Before we get into the presentation, I just wanted to introduce some of the key individuals within the team. It gives you a context as to why we set up this real estate investment trust. I'm joined today by Rob Abraham, who's the Managing Director for Supermarket Income REIT. Key other names on our team is Ben Green. He's co-founder and principal of Atrato Capital. Ben's completed around GBP 5 billion of supermarket sale and leasebacks. That, we believe, is more than anybody else in the UK. Steve Windsor, again, he's also a co-founder of Atrato.
In his previous role, he was an advisor to Alan Stewart, who was CFO of Tesco on their store buyback model. Of course, some other names to point out, Vince Prior. He was previously Head of Property at Sainsbury's, and of course, Justin King. Justin King joined us as a senior advisor. We knew Justin from our previous role. He was, of course, for those of you who don't know him, he was Chief Executive at Sainsbury's for around 10 years, and he currently sits on the board of Marks & Spencer. He loved what we were doing and was keen to join us. Now, why introduce those individuals? Well, it explains why we put this team together.
What we created was a coverage model for our sector, and we cover our tenants, be it at the board level, i.e., John Allan, Chairman at Tesco's, all the way down to the individual store managers. That's designed to give us a deep understanding of the sector, but also deliver a material information as well as relationship advantage. Hopefully, you're gonna see that as we explain our strategy a lot more in the coming pages of this presentation. Just to introduce our investment strategy. There's three core pillars to our strategy which underlies what we really love about this sector. The first of those is lease length and structure. We target leases that provide long, unexpired terms with inflation-linked rental uplifts. Our portfolio WALT is currently 15 years, and this provides a high degree of certainty of income, which grows with inflation.
85% of our portfolio is inflation-linked. Rob will take you through the details of our portfolio a bit later in the presentation. The second pillar to our investment strategy is omnichannel stores. That's future-proofing investments in UK supermarkets. Now, what do I mean by omnichannel stores? Omnichannel stores are stores that operate as traditional supermarkets, but they also operate as last-mile fulfillment hubs for online grocery. That's both via home delivery as well as Click and Collect. Now, as more grocery sales go online, how do we, as real estate investors, capture that growth? Well, we do that through our omnichannel investment strategy. We're gonna take you through that in a lot more detail in this presentation. Now, on top of that, we're only targeting stores that have very strong trading performance and sit in the upper quartiles of the operator's portfolio.
The third component of our strategy is site size. One of the benefits of investing in this sector is the size of the land that we acquire. On average, our site size is around 10 acres, and the store only covers around 25% of that site. That's what we love about this sector, because that amount of land gives us a lot of optionality to explore asset management opportunities, but also work with our tenants as their operational needs on the sites change. Most recently, we've seen stores requiring additional capacity for online fulfillment, transitioning car park areas for more Click and Collect, changing the back-of-house operations to support more home delivery. Our sites are of a size that enables us to agree to our tenants' requirements for changing how they operate on our sites. To summarize in our portfolio.
Currently stands at GBP 1.7 billion of assets under management. That generates an average yield of 4.7%, and again, our average lease length is 15 years. We have 67 stores in our portfolio, and again, 85% of our rental income is linked to inflation. We're listed on the premium segment of the London Stock Exchange, and we are part of the FTSE EPRA Nareit index. Now, taking all of these factors together, you can see how we build a strategy of acquiring high-quality supermarkets. This page illustrates how our acquisition and our growth is delivering persistently high returns for shareholders. Top left shows the growth in our rental income over the last five years as we've built our supermarket portfolio. Top right, you can see that that enables us to deliver strong dividend growth.
Bottom left, you can see our aggregate growth from acquisitions is still coming at the same time as growing NTA. Our NTA now stands at 113 pence from our last issued results. Finally, bottom right, you can see how we've consistently delivered on our target level of shareholder returns with our cumulative return since our IPO at just under 50%. I'm now gonna hand you over to Rob, who's gonna take you through the grocery market in a bit more detail before we take you into more detail on our investment strategy. Rob?
Stephen, hi, it's Mark. Just to let you know, that alarm that you heard was a fire alarm in the office, and Rob has had to evacuate the building. Unfortunately, that was what the noise was that came across. He's just sent me a message to say that. Apologies. If I could just ask you to progress. He doesn't think they'll be back in for the rest of the presentation, but I'll notify you as and when he does.
Okay. Thanks a lot.
Sorry about it. Thank you.
An easy get out for Rob. I'm gonna take you through the UK grocery market in a bit more detail. There's three components which we believe structurally supports our investment strategy that is currently playing out in the UK grocery market. The first of those is working from home. We've seen an increased level of working from home since the pandemic, which is now continuing. The second factor is around digital transition. We're seeing more and more grocery go online, and the fulfillment strategy is vital to understanding our investment strategy and our investment focus on omnichannel stores. The third is inflation. UK grocery has always been a strong inflationary hedge as the UK grocers have been able to pass through inflationary cost pressure into prices.
These are the three core tailwinds that are currently playing out in the grocery sector, which is aligned to our investment strategy. I'll take you through each one of those now in a bit more detail. Working from home. As I've said, we've seen a significant increase in the level of working from home. On the graph here on the left-hand side, you can see that that's a 350% increase in working from home since 2019. Now, that additional level of working from home means spend on lunchtime and other products which would traditionally have gone into the likes of Pret and Eat, et cetera, have transitioned into the supermarkets. That's generated a 10% increase in supermarket sales growth. The second of these factors is the digital transition in grocery. There's been a step change in online grocery.
It's grown by 88% if we look at it on a two-year basis, which effectively smooths out a lot of the noise that we've seen during the pandemic, but that's a phenomenal increase in online grocery. Now, the important factor to remember is how is that online grocery demand fulfilled? Eighty percent of all of UK online grocery is fulfilled from stores, what are now known as omnichannel stores. If we eliminate Ocado and Ocado's market share in UK online grocery, that numbering increases to over 90%. We're gonna explain why the operators use stores to fulfill online grocery in a bit more detail shortly. Of course, one of the fastest-growing segments of online grocery is Click and Collect.
It's far more efficient at certain times for customers to do the delivery bit themselves by going to the store and collect their online ordered groceries. That's the fastest-growing segment, and real estate plays a critical role in Click and Collect services. Of course, this explains why we focus in on omnichannel stores. If we look at the sales growth in omnichannel stores, which are benefiting through increased physical sales as well as online sales, that segment of the market is growing at around 16%. Now, if we compare that to non-omnichannel stores, just traditional supermarkets, that growth is around 4%. That graph or illustration on the left explains why we're focused in on omnichannel stores. That's the segment of the market that we're targeting because that's the segment that has the highest level of growth.
Right now, the property market is not differentiating the value on omni-channel stores relative to non-omni-channel stores. Now, why do supermarkets use omni-channel stores to fulfill online grocery? Well, proximity to customer is key for lower fulfillment costs. The map here on the left is Tesco's online distribution network. Those blue dots across the UK there, they're stores or omni-channel stores that they use to support online grocery through both home delivery and Click and Collect. The red dots you see there are their online only fulfillment centers. You can see they're clustered in and around London, 'cause London is one of the poorest served places for supermarkets because space is so expensive. On the right-hand side, you can see the economics. That explains why they use those blue dots.
I mean, Tesco's blue dots, you can see there, that gives them 90% coverage across the UK within less than an hour's delivery time. When we look at the economics of online fulfillment, and if we compare a centralized fulfillment model, such as the one that is used by Ocado, using centralized distribution sheds to distribute online grocery. Actually, their fulfillment center is just so far away from their customer that the distance they have to travel to get to their first customer run and then get back again means that their KPI on deliveries, which is measured as delivery drops per hour, is around 2. A van can do around 2 delivery drops per hour. Then if we compare that to omnichannel stores, i.e. those blue dots we've illustrated there, because they're closer to their customer, they can actually achieve a greater level of delivery density.
Across our portfolio and across the UK, we think that's around 4 drops per hour at the moment. Again, shorter journey times to your customers means you can enhance those delivery densities. The impact on cost is phenomenal, and you can see it there. With centralized fulfillment, and taking into account that on average a man and van cost is around just under GBP 20 per hour, their cost of their delivery is much higher 'cause they're amortizing that cost over 2 deliveries. Whereas for omnichannel stores, where you're amortizing that cost over 4 drops per hour, it obviously reduces that cost considerably. Right now, the average cost of fulfillment is around GBP 8.
Supermarkets were saying to us for a long time that, "Look, pick and pack is a small component part of the overall costs, and there's a lot of investment in technology and automation around the pick and pack operation, but in reality, the largest cost of online grocery is in the delivery. You can only reduce that cost through proximity to your customers." Hence, that's the reason why over 90% of the Big Four's online groceries is fulfilled using stores, omnichannel stores. For us, that's the segment of the supermarket property space that we're targeting. The third of the key tailwinds behind our investment strategy is inflation. Grocery prices have always been strongly correlated to inflation.
In this graph here, the blue columns you can see is grocery market index growth, and then the gold line, which is RPI, and you can see that level of correlation has been around over 90%. Grocery is a good source of inflation protection. Across, on the right-hand side here, you can see some of the most recent announcements in this space, from Kantar, Barclays, even Tesco and Morrisons, who are making it clear that they do need to pass through their price pressure through to prices. Which for us means that as grocery prices elevate, will our rents remain affordable? Because of course, 85% of our rents in our portfolio are currently correlated to inflation. Turning to our market. This gold line here is the yield series that we produced.
A lot of supermarket indices are not reflective of our space, i.e., omnichannel supermarkets and long leases. We created this yield series. It comprises of all transactions on supermarkets with leases in excess of 10 years. This is reflective of our investment market. You can see since we launched this concept back in 2016, supermarket yields have compressed, and they're currently finding their clearing level at around 4.4%. Now in comparison, our portfolio valuation yield, which is currently around 4.7% on average, looks conservatively valued relative to where the market is currently finding its clearing level. That makes sense because values tend to look retrospectively rather than prospectively when setting values. If our valuation yields ever get to that kind of 4.4% area, we think that's about 12-13 P on that. Now, supermarket yields still offer considerable relative value.
If we look, for example, at where Tesco's corporate bonds and where Sainsbury's corporate bonds are trading, supermarket yields offer considerable relative value. Don't forget, it's not just the passing yield. We also benefit through the inflation growth. If we looked at our yield to maturity equivalent or the IRR on our store investments, our returns are closer to 6%-8% over their life. Therefore, property yields still offer considerable relative value to corporate bonds, and hence we think there's further yield compression to come in this sector. It's not only compared to our tenants' corporate bonds, but even if we look at other comparable property sectors, i.e., for example, distribution assets, will supermarkets still offer relative value? On the distribution side, we're seeing transactions regularly trade now in and around the 4% level.
Of course, turning back to inflation, even ignoring the long-term inflation linkage in our portfolio, supermarket yields that do benefit from inflation-linked uplifts on their rents still offer considerable relative value to, say, index-linked gilts. That's a 6 and over 6% yield advantage to corporate, or index-linked gilts that trade in the market. Again, this is why we believe there's further yield compression to come in this sector.
Steven, I'm back online, you'll be pleased to know, Steve. If you want me to take the portfolio, I can do that.
Please do. Welcome back, Rob.
Apologies everyone, we had a fire evacuation, but I am back. Just to take you through, Supermarket Income REIT's portfolio is on the left there consists of 41 supermarkets. We've enhanced the portfolio recently through the additions of a couple of new tenants to the portfolio. That's M&S Foodhall up in Liverpool, and also our first Asda down in South Wales in Cwmbran. That store's a particularly strong trader. Does more than double of the turnover of any of the competing stores in the town, and Asda's recently invested in an extension there to perform home delivery to the local neighborhood. Ticks all the boxes for us in those respects. You can also see down in the top right, the portfolio benefits from a long 15-year WALT, weighted towards that bracket of in excess of 10 years.
Those leases that are in the shortest bucket there actually are non-food exposure, which is adjacent to the large format supermarkets. The shortest of our supermarket leases is still at least eight years, so as I say, benefit from a particularly long lease profile. Then finally, in the bottom right there, you can just see the weighting towards the leading and largest grocery players in the U.K. market, particularly Tesco and Sainsbury's. That's no real surprise. They had the most extensive sale and leaseback programs historically in the early 2000s and 2010s. And that means there's just naturally a greater supply of stock, and we target the very best performing stores, so we have a natural weighting towards Tesco and Sainsbury's. The group's also well-placed in the inflationary environment.
85% of our leases directly benefit from inflation uplifts, and as market rents are a function of turnover, the benchmark for operators being 4% of store turnover or effectively two weeks trade per year. That means the inflation uplifts in our leases are sustainable as we're seeing revenues and rents grow in parallel, ensuring that rents remain affordable for the operators. Of course, the growing rents also drive NTA growth through increased values. Of the leases that are linked to inflation, there's an average cap of 4%, whilst 64% benefit from annual reviews, and that provides regular rental growth.
Due to the way uplifts are calculated, we get good visibility throughout the year over our uplifts, with a weighting towards the annual reviews, of course, on an annual basis. To help bring things to life, we also like to give you a bit of detail at the asset level. You may have heard us talk recently about this example in Tesco, our Tesco in Prescot. This one ticks all the boxes for us. It is a top quartile trading store for Tesco in a densely populated catchment with 14 home delivery vans. There was a particular value opportunity here compared to your standard purchaser. 4 years unexpired on the lease, and it is oversized.
It's about 140,000 sq ft relative to the annual sales. It was also over-rented. Actually, for your standard purchaser, there was a significant amount of risk. We were able to de-risk this acquisition through our unique position with our relationship with Tesco. We were able to negotiate a new 15-year lease with annual CPI uplifts. That was negotiated while we were doing our due diligence on the asset in parallel, so we were able to complete that new lease on the day of completion of the acquisition. The rent was rebased, so the starting rent was 4% of turnover. That was the benchmark I just mentioned.
We also acquired the opportunity for some further online capacity through an additional plot at the rear of the store, which would allow for expansion of Tesco's service yard in the future if required. Just turning to another example, and this was another off-market transaction, and it's driven significant value for our shareholders. It's another Tesco. This was up in Leicester. We acquired in November 2020 from British Land. Again, it's ticking all of those same boxes. It's a top trader in a densely populated catchment. Again, 15 home delivery vans. And at the point of acquisition, there was 8 years remaining on the lease there. Again, it's oversized. This one's about 160,000 sq ft relative to its annual sales. Again, it was over-rented. Actually, that was something we factored in at acquisitions.
We acquired a highly attractive 6.3% net initial yield, so the over-rent was priced in. In turning to today, we've been able to generate GBP 10 million of capital upside for shareholders. That was through a regear to a new 15-year term again, this time to the annual RPI uplifts. Again, the starting rent rebased to 4% of turnover, so meeting that affordability benchmark. This was one that actually following on from the Prescot regear I just mentioned, Tesco approached us to do this regear. There was about 6 years remaining on the lease by the time we agreed the regear. It was just a reflection of that these larger stores, there was a perception at one point that the oversized stores that you might see the operators step away from.
Actually, we've proven with two of these examples that provided the rent is rebased to the right affordable level for the operator, then they're willing to commit long-term to these sites and also introduce inflation linkage in the leases. It's been two very strong transactions for us. In the case of the Leicester store, as I mentioned, we've increased the value by GBP 10 million on the food store, and there was also some adjacent non-food units, which through active asset management, we've been able to drive a further GBP 5 million of valuation upside. Total gain of GBP 15 million.
Versus a purchase price of around GBP 63 million in just over 18 months. It's been a very good deal for Super.
I think it's worth just pausing on that, Rob, because to put that in context, I mean, rebasing to 4% rent turnover, which is a highly affordable rent, especially compared to other asset classes, but the operators are committing to these assets for 15 years and giving inflation-linked rental uplifts for that 15-year duration. I mean, to me, it just illustrates the confidence that they have in these assets and their long-term importance to their operations. If we put that in context of Tesco's and Sainsbury's and the results and their cash flow generation and their profit growth, et cetera, you can see that strategy compounding and why they're committing to these assets for the long term. It just shows the cash flow generation of value that's implicit in this asset class. I'll take you through the JV. We do own a joint venture.
I'll just explain the joint venture, and then we can take you through some of the returns. I mean, the easiest way to explain the joint venture is that we acquired a portfolio, an interest in a portfolio of 26 Sainsbury's stores, which roughly had 2 years remaining on their leases. Those stores were highly reversionary. Now, our conviction at the time of the acquisition that Sainsbury's would wanna own these stores for the long term, that's exactly what's happened, and Sainsbury's have now exercised purchase options to buy back 21 of those stores, and that will be positive to the NTA of Super. I'll quickly take you through the detail before going into the financial returns. The structure, it's 26 Sainsbury's stores. These are high quality supermarkets, some of their top trading stores.
We have a 25% interest in that structure. We paid GBP 108 million for that interest, and it's currently generating a running return of around 11% per annum for us. Now, this year, Sainsbury's announced their intention to buy back 21 of the 26 stores. That acquisition is due to complete around mid to late 2023, at which time our original investment will then be liquidated. In terms of returns, I mean, this has been great business for us. Sainsbury's decision to buy back 21 of the stores has increased the investment value of our interest by around GBP 30 million. Now, on top of that, I've already taken you through the yield compression that we've seen in the supermarket space because of the relative value. That yield compression has generated an additional GBP 14 million gain from our investment.
Of course, we've had the running yield since we've acquired it, which has generated around GBP 16 million. All in, we acquired the interest for GBP 108 million, and it's generated GBP 60 million of gain over the around 2 years since we've owned this portfolio. Now, I think what this illustrates is just how undervalued UK supermarket property has been in the investment market. I think it also illustrates, alongside the two other examples that Rob took you through of Tesco's, of just how important these assets are to the operators. Sainsbury's decision here to buy back 21 of these stores just proves how valuable these assets are to, A, their business model, and B, how much value they generate over time. Finally, ESG.
I mean, another factor of why we love investing in this sector and our focus in this sector is the ambition of our tenants to become carbon neutral in their business operations. All our tenants have net zero target dates, and this has now been extended to become net zero on their Scope 3 emissions, i.e., decarbonizing their entire business supply chains. You can see our current EPC portfolio on the left. It's a continuously improving picture. I mean, for example, there were 9 properties which held an EPC rating of D or E last year, and this compares to around 14 properties in the year previous. You can see the progressive improvement that's coming through as our tenants, and increasingly our ambition, is to improve the energy efficiency of the assets as they move towards their overall net zero target.
Now, ESG is an area we should score high as an investment institution, and we're doing more in this space. We've recently hired a new Head of Sustainability, Christoph Scaife, who has considerable experience in this space, and he's joined us to assist us in more mainstream reporting and potentially reporting on more mainstream indices, such as the MSCI, Sustainalytics, et cetera, all designed to make your job a lot easier in measuring our progress towards increasing the environmental sustainability of the buildings in which we invest within. That's it. We can pause now for questions.
That's great. Robert, Stephen, thank you very much indeed for updating investors this afternoon. Can I please ask investors to continue to submit your questions using the Q&A tab situated on the right-hand corner of the screen? While Robert and Stephen take a few moments to review those questions submitted already, 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 your Investor Meet Company dashboard. Robert, Stephen, as you can see, you've received quite a few questions throughout today's presentation. Good to have you back, Robert, as well. Perhaps if I could just hand back to you guys just to read out those questions and, where appropriate, give a response. Then I'll pick up from you at the end, if I may.
No problem. I will act as chair, Rob. I think we'll take the first question from Tim R. I see here. Given the high level of linkage between your leases and UK inflation and your high level of visibility on future revenues, and in the context of everyday inflation being experienced by your shareholders, can you give us any guidance as to how you might be looking to increase your dividend in the next financial year? Yes, Tim, I can probably take that one. In terms of the dividend policy, it is a progressive dividend policy, and it's linked to the underlying growth in our rental income year on year. Rob, do you wanna just summarize again our inflation linkage and how that looks on our portfolio?
Yeah, sure. As we mentioned, 85% of leases are linked to inflation. Of those 64% review annually, and the remainder are almost entirely 5-yearly reviews. It does mean some of those reviews are slightly lumpy. Of course, we're constantly growing the portfolio and adding additional leases to that, but that gives you an idea of how those reviews flow through. In the first half or certainly over the year, our average cap is 4%. So kind of that's broadly given inflation is running higher than our caps. Even at the start of the year, it was below the caps in some cases.
Yeah, that I think gives you an idea of where our kind of rental income is moving year on year.
The interesting thing about the cap levels is that grocery inflation overall is now exceeding the cap on rents. In that respect, we're seeing this compounding effect of under-rentedness now within stores because sales growth on a nominal basis is actually growing at a rate which is greater than rental growth on rents because of the imposition of caps. In that respect, rents will remain highly affordable for tenants. Across our portfolio, our average rent turnover is just under 4%. As Rob took you through on those examples previously, that's the kinda sweet spot for affordability. In short, we believe our own portfolio is roughly rack rented now. We're taking next question from Mark B. Given yield compression affecting acquisition opportunities, do you expect your portfolio yield to fall as you deploy recently raised funds?
I mean, that's a good question, Mark. Yes, we are seeing transaction levels find their clearing rate at around 4.4%. For info, our break-even yield off our last raise and off the last raise price was around 4.3, 4.25. That's where we'd need to break even to maintain our current dividend rate. In that respect, our cost of capital remains highly competitive. Of course, one of our KPIs we'd like to monitor ourselves against is just the average deployment rate. Of course, we don't wanna hit our break even, we wanna exceed it. In that respect, Rob, in terms of average yield on the pipeline, I mean, it's well above the kind of break even, right?
Yeah. Yes. I mean, those of you who saw our presentations during the raise period will know that our near-term pipeline was actually more like 5% on a year basis. There was an element of non-food in there which is complementary to the supermarket, still very much weighted towards the supermarkets at around 75%-80% of exposure. The benefit is that you're able to achieve a slightly wider yield on those. On a blended yield basis looks very attractive for us. As Stephen mentioned, that means our deployments are constantly accretive.
I think that one of the parts of the question is relating to our own portfolio, and I think it's fair to say we do think that our portfolio is quite conservatively valued at the moment, and so we like to believe that there's an opportunity for further growth there. Steven's taken you through the yields at that 4.4% clearing level, and with our portfolio valued at 4.7, it certainly feels like on our standalone food stores, there's some way to go on those yields.
Great question from Mark B. on IFRS 16 for the technical people who are accountants on the call. IFRS 16 reduced the propensity of operators to lease versus buying them outright. I mean, this is a great question, Mark. For those who aren't accountants, I mean, leases are now on balance sheet as liabilities. Previously, they were all off balance sheet. Has that changed operators' view? Yes, absolutely. Leases are just expensive debt now. I mean, you saw on that yields graph the difference between their bonds and their supermarket yields. In that respect, it makes more sense for them to buy their stores back and bearing in mind they can raise debt at around 3%, and they can buy back their stores that have a lifetime IRR in our view of between 6% and 8%. That makes absolute sense.
Of course, Steve Windsor, who I introduced at the start of this presentation, wrote the buyback model for Tesco's and made this clear that the change in accounting standards meant that it was better for them to buy back stores and just own them. That's a feature of our investment market. That's what makes this unique, is that for UK supermarkets, there's a net contraction of investable supply in the market because the operators are buying them back. Tesco's in around the last 6 years have bought back around GBP 1 billion of their own stores. I took you through Sainsbury's, and they're buying back 21 stores. We think that's around, roughly over GBP 1 billion of purchase commitment from them. In that respect, our investment market is declining. We're still seeing a lot of supply. We can still deploy capital.
We're still seeing some really attractive high-quality supermarkets come to market from institutional sellers who have a variety of reasons, one of them being driven by their need for liquidity. However, the overall market is declining in size, and I think that's another factor as to why we feel there's further yield compression to come and why there's so much implied value in this asset class because the nature of the decline in supply will actually mean that the value of this asset class has further to go in terms of increasing. I'll turn to another quick question that came in on our premium listing. I'm just pulling it out. Apologies if I don't get this perfect, but from Alan, talking about the impact on share price from our premium listing. For those who didn't know, we were previously on the specialist fund segments of the London Stock Exchange.
Given the portfolio growth and the diversification, we're now a premium-listed stock, and we are now included in the EPRA NAREIT index as well as the FTSE 250 index. We have seen some share price growth because the index followers need to buy our shares as they rebalance their portfolios to reflect the index. I think the question was around, do we expect more to come? It's hard to say. I can't give you forecasts on share price, I'm afraid. Look, the overall benefit to shareholders of becoming a premium-listed stock and becoming index included was around liquidity and effectively having a greater pool of buyers in our stocks that follow that index. We would expect that liquidity benefit to continually compound through in terms of overall growth going forward.
Just quickly running through, question from Alessandro on the current dividend cover situation. Is there an upper and lower cover level that the fund is happy to operate within? Rob, do you wanna take that one?
Yeah, I think on dividend cover, we're currently over 100% covered. Of course, we've recently raised equity and deploying that in an accretive manner will allow us to continue to do that. Of course, we're targeting always being in excess of 100% covered, and then we're able to pass through our rental income growth in the form of dividend uplifts as that comes through. Expecting to move in parallel, but ultimately, that's the level we're targeting. We've always done historically well on deploying in an accretive manner that allows us to maintain that dividend cover on a forward-looking basis.
Sticking with you, Rob, on deployment, quite a few questions coming in on how we're getting on with the last raise and our deployment and when we think this will be spent.
Yeah, I mean, slightly limited as to what we can say, but I think it's a fair question off the back of the recent equity raise. When we were raising, we showed that there was a strong pipeline that's still there. We're in exclusivity on a number of assets that we're executing on at the moment. But we're hoping to be able to make some announcements in the not-too-distant future, as we begin to deploy those proceeds. I think you can look to our historic performance as to the pace at which we've deployed, and we certainly don't expect to be any slower this time around.
There's a question coming in on the JV. I understand Sainsbury's have exercised an option to buy back many of the supermarkets. When do you expect the sale proceeds to be received, and are you confident you can reinvest those proceeds? In short, yes, we will receive the monetization of those proceeds, which is around GBP 170 million of current valuations. That's mid- to late 2023, when the option price will be agreed, and the option will be settled with Sainsbury's. When do we expect to invest those? I mean, we've got a long run up to that, Rob. It's a good question. I mean, given that it's a known factor and we know when that sale needs to complete, we've got quite a long time to assemble a portfolio that we can deploy into.
It's one of the features in our investment strategy, is that we always like to build a pipeline, take that pipeline to the market when we're looking to raise equity capital. That's what we did on our last raise, and as Rob said, we're in the process of executing on that pipeline. I think for this in 2023, we know when those funds will be received, so we do have a long run up to build a pipeline. Overall, we are still seeing a lot of stock come to market. I mean, last year, we saw about GBP 1.7 billion of UK supermarket property exchange hands, and we expect maybe slightly less levels into next year.
Nevertheless, it's still a liquid market, and there's still a lot of factors as to why people are selling, primarily institutional funds who are rebasing portfolios out of retail or asset classifications into distribution, life science, et cetera. It's still mad to us, but it's a reality that those funds still put supermarkets despite their value and despite their inflation benefits and the defensive sector that they operate within, that they are still classified as retail, and they are still selling those in order to rebase their portfolios. To that respect, we're net beneficiaries of the liquidity that they're introducing. Long way of saying we are highly confident we can redeploy the Sainsbury's proceeds, but of course, we'll assess that at the time next year, and it's ultimately to the board's decision as to what best use of those funds will be.
Quick question, Rob, on the bond offering. For those who don't know us that well, we did get an investment grade rating from Fitch this year. It was one of our key milestones. We're now rated investment grade by Fitch Ratings. Rob, do you wanna give a quick update on our debt plans and we were looking at the bond market, which is quite.
Yeah, that BBB+ means that solid investment grade rating does give us the optionality of longer-dated financing. There has been a bit more volatility in that market, given what's going on in the world at the moment. We've been exploring our options. We do have the ability to execute on bonds. We've also got a very supportive bank group, as you've seen previously, well-diversified, an international banking group with really good product capability. We've got options open to us, and we're just exploring those at the moment. I think you shouldn't expect any change in terms of our long-term LTV target range of that 30%-40%. Any
Depending on what instruments we go for, that will be incremental as we deploy the proceeds of the equity raise or refinancing existing debt, but it's not gonna be something that's gonna take us materially beyond the long-term target LTV range. And then in terms of sizing, that will all be dependent on market conditions at the time. Some of you may know that a benchmark sterling bonds, so kind of minimum size is roughly two hundred. Well, it is GBP 250 million. So that gives you an idea of potential sizing. But yeah, we're in a fortunate position that grocery is a well-understood sector by financing parties, whether that's in the bond market or the bank market. We've got good options available to us at the moment.
Last couple of questions before we close out. I can probably blast through these fairly quickly. The first one is just on emissions overall, and I think a comment that the UK is a tiny part of worldwide emissions. Yes, completely agreed. Look, for us, it's about making these buildings sustainable and helping our tenants get to their overall net zero target. It is an important part of our investment strategy, and these assets are perfect for reducing or increasing their overall sustainability. If you think, they're all flat roofs. Those flat roofs are perfect for solar. Solar investment is the next key milestone for us and putting those on the rooftops of our buildings such that our tenants can effectively source green decarbonized power for most of their operations. Second one from Michael, around expansion into Europe. No plans at the moment, Michael.
We're seeing GBP 1.7 billion of liquidity in this investment space. We've got plenty to keep us going. For us, it's a knowledge model, relationship model with our tenants. To that extent, we have those relationships in the UK. A question from Alistair, which is quite an interesting one. The yield differential between inflation and supermarkets yields, which are capped. I mean, it's a great question, Alistair, because a lot of people do say to us, "Well, you're capped, so are you inflation linked?" I mean, we benefit inflation in two ways. One is through the rent reviews and the additional income we get through the rents, which is obviously capped, and as Rob said, that averages around 4%. However, the rents are sustainable.
Given that one of the nice things about having caps there, of course, is that these assets won't become unaffordable for our tenants, and especially in the grocery space, whereby they are historically and currently passing through inflation pressure through to their prices. They have to, because margins are quite tight. They can't really absorb cost pressures. In that respect, as I said earlier, we are seeing grocery prices exceed cap levels on supermarkets, which means rents are becoming even more affordable in this high inflation environment. Now, what does that mean for us? Well, we benefit through a second way, of course, through valuation growth. Because if market rents are growing with inflation and growing with grocery price inflation and using that 4% rent turnover as a benchmark, then the imposition of the caps means that our assets are actually getting more affordable.
In that respect, the value of the real estate from a yield perspective is also increasing. We get the valuation benefit as well as the income benefit. We will grow EPS as well as our NTA, so both levels of inflation. We think that level of growth, when you project that into our total shareholder return, means that we are looking at levered returns far in excess of inflation growth, which you can kind of see when you look back at our historical shareholder growth on a total shareholder return basis, which has been averaging around 12% since we launched our IPO. In that respect, yes, we have caps, but we don't think it significantly impairs our total return assumptions. I think that was broadly everything.
That's great, Stephen. Thank you and Robert for taking the questions from our investors. Thank you to all those investors that have taken time to submit questions throughout today's meeting. Stephen, Robert, I know investor feedback is particularly important to you both, and I'll shortly redirect investors to give you their thoughts and expectations. Before doing so, Stephen, I wondered if I may just hand back to you just for a few closing comments, after which I will send investors to give you their feedback.
Yep, absolutely. Look, overall, we have scaled the business, but what we're delighted about is that we are delivering persistent growth for shareholders as we grow and scale that business. Last year, we achieved big strategic milestones for the funds. The first of those was an investment-grade credit rating, and of course, we're now a premium-listed stocks. Our investment strategy is, of course, structurally supported by inflation, increases working from home, and the shift towards online. And in that respect, we are well positioned for the future. We feel fortunate to be operating in a space, the UK grocery market, which has been traditionally countercyclical and very defensive. As macroeconomic backdrop becomes ever more uncertain, we're fortunate to be in the sector that we're focused within.
That's great. Steven, Robert, thank you once again for updating investors this afternoon. Could I please ask investors not to close this session, as you'll now be automatically redirected for the opportunity to provide your feedback in order that the company can better understand your views and expectations. It will only take a few moments to complete, but I'm sure it will be greatly valued. On behalf of the management team of Supermarket Income REIT PLC, we'd like to thank you very much for attending today's presentation. That now concludes today's session. I may wish you all a very pleasant afternoon.