A gap has opened up between the yields investors are paying for the property assets of supermarket chains that have a significant amount of corporate debt versus those that are relatively debt free.

Data from CoStar found that investors were currently paying higher yields — and therefore lower average prices — for assets leased to Asda and Morrisons compared to Aldi.

Morrisons was bought in October 2021 by U.S. private equity firm Clayton, Dubilier & Rice in a £7B deal that saw the supermarket take on £6B of debt used to finance the purchase.

Asda was bought in 2020 for £6.8B by British firm EG Group and TDR Capital, which took on £4B of debt.

CoStar said that in the first quarter of the year, PIMCO bought four Morrisons supermarkets for £110M, a 6.7% yield and a 19% discount to the original asking price of seller M&G.

Aviva Investors bought an Asda store in Hayes for £31M at a 6% yield.

In comparison, it said two Aldi stores in Weymouth and Bury St Edmunds were bought for £7M each, at yields of around 4%.

"The keen pricing likely reflected a combination of Aldi’s covenant strength and no or low leverage on the buyer side," CoStar wrote in a report.

First-quarter supermarket real estate investment volumes were £350M, a 340% rise on the previous quarter, with investors attracted by inflation-linked leases. And with Supermarket Income REIT selling a portfolio to Sainsbury’s stores for £430M, Q2’s figure is guaranteed to be even higher, CoStar said.