£605m sale and leaseback deals by Tesco

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by Lin Freestone

The supermarket group, Tesco, has secured further sale and leaseback agreements with four institutional buyers for a total consideration of £605m.

Under the agreements, Tesco has sold the freeholds of 13 stores and rented them back from the new pension fund owners, who are Universities Superannuation Scheme, Prupim, LaSalle Investment Management and Canada Life.

The four transactions are the latest in a £5bn programme of sale and leaseback deals. Tesco entered into a joint venture sale and leaseback with British Airways Pension Fund at the end of 2006, and with British Land and Prupim earlier this year. The deals were a mixture of both 100% lease back and joint venture sale and leaseback deals and raised a sum in the region of £1.4bn.

The lowest yield achieved on the stores was 4.88%. The deals represent 2.4% of the value of Tesco’s UK stores portfolio.

The programme plans to release £5bn from the firm’s £30bn-plus property portfolio by 2011 through similar deals.

Other retailers, including Sainsbury’s, have similar strategies to unlock the value in their large freehold properties.