Tesco agrees third sale-and-leaseback deal

UK retail giant Tesco gave information on Tuesday of a £207mln (EUR 257mln) sale-and-leaseback deal with Prupim, the property arm of UK insurer Prudential. The news came during the during the presentation of Tesco's preliminary results.

The Prudential deal, carried out at a 4.8% yield, was the third transaction of the retailer's £5bn-plus property programme. The first was with the British Airways Pension Fund at the end of the 2006/07 financial year. The other 2007 transaction was with British Land in March 2007. The two 2007 deals have delivered aggregate proceeds of £1.2 bn (EUR 1.49bn).

The net book value of the company's fixed assets now stands at £19.8bn (EUR 24.59bn), most of which is in its freehold store portfolio. Tesco estimates the portfolio's current market value at £31bn (EUR 38.5bn), which represents a 57% premium to book value.

Tesco said in a statement: 'While yields have increased modestly in recent months, appetite for Tesco's property and covenant remains strong, and if market conditions remain conducive, we expect to be able to complete further transactions on attractive terms in the months ahead. We are currently in discussion with potential counterparties. Proceeds will continue to be used to fund expansion and our share buy-back programme - which has already re-purchased Tesco shares worth over £1.1bn.'