Pearl buys 50% stake in EUR 1.4 bn Tesco portfolio

Private property investment company Topland said on Friday that it has completed the sale of its 50% stake in a portfolio of 33 Tesco supermarkets and two distribution units to Axial Investment Management, an investment unit of the insurance firm Pearl Group. The company would not disclose the value of this transaction but said that it was sold 'following capital appreciation in line with the market'. However, sources close to the deal suggested the transaction valued the entire portfolio at about £950 mln (EUR 1.36 bn).

Topland bought the portfolio in a 50/50 joint venture with Tesco in April 2004 for £675 mln. The assets are occupied by the UK retail giant on 25-year leases subject to annual fixed increases. Tesco is retaining its 50% of the portfolio. Topland's interest was marketed by Mark Morgan of Morgan Williams to a limited number of parties and the deal was agreed eight weeks ago - before the onset of the 'credit crunch' in the financial markets that has delayed the sale and leaseback ambitions of other retail chains in Europe recently. Topland said that the deal 'substantially increases Topland's cash holdings at a time when it's looking to reinvest in the market.'

Topland was advised by Osborne Clarke and BDO Stoy Hayward. Axial Investment Management was advised by Ashurst. Tesco Property Limited Partnership was advised by Berwin Leighton Paisner.