British retail giant Tesco has teamed up with UK's second largest property company British Land in a £650 mln (EUR 956 mln) sale and leaseback joint venture. The partnership involves 21 Tesco superstores, or about 3% of the total. Tesco aims to release value to fund its growth strategy.
British retail giant Tesco has teamed up with UK's second largest property company British Land in a £650 mln (EUR 956 mln) sale and leaseback joint venture. The partnership involves 21 Tesco superstores, or about 3% of the total. Tesco aims to release value to fund its growth strategy.
UK's largest supermarket group said the deal, with a 20-year term and an early termination option in 2017, would generate net turnover of £570 mln and once-off profit of £142 mln. Colliers CRE advised British Land on the purchase and Tesco was advised by Morgan Williams.
The portfolio generates rent of £29 mln per annum. Rents will be subject to annual RPI indexed increases for the first 20 years capped at 3.5% per year. The portfolio will revert to open market rent reviews at year 20 with options for Tesco to either renew or buy back the stores at open market value.
The 50/50 joint venture is the second phase of a sale and leaseback programme launched in April 2006 with British Land, and follows the sale of 16 Tesco stores last January to the British Airways Pension Fund for £445 mln. Tesco and British Land launched their first property joint venture in 1996. It now holds a £1.16 bn portfolio that consists of four retail parks, three shopping centres and 13 Tesco stores.
