Tesco closes £605m sale-and-leaseback deal

UK retail giant Tesco has completed four sale-and-leaseback transactions in the latest phase of its ongoing £5bn disposal programme aimed at releasing value from its UK property portfolio. The £605mln (EUR 760mln) disposals consist of 13 Tesco stores with total floor space of 158,000 m2, accounting for around 2.4% of Tesco's UK stores portfolio, and a distribution centre.

The deals were a combination of both a 100% sale and a joint venture basis. The four purchasers were the UK private pension scheme Universities Superannuation Scheme, British life insurer Prudential's property arm Prupim, LaSalle Investment Management, and Canada Life. The company said that the lowest yield achieved on the stores was 4.88%.

In a separate press release, Prupim said on Friday that it has bought a £94.5mln portfolio on behalf of its client fund Prudential Retirement Income. The portfolio comprises three stores in Suffolk, North Yorkshire, and Kent and follows closely from the initial £207mln portfolio purchased earlier this year. Tesco is taking leases back for 20 years and options to renew for up to a further 30 years and will continue to manage the portfolio.

'Since the start of 2008 we have invested more than half a billion pounds in the UK market on behalf of our high lease value funds and Prupim continues to have a strong appetite for these types of properties,' said Steffan Francis, Director of Institutional Funds at Prupim.

Previous property joint ventures under Tesco's disposal programme include a partnership with British Airways Pension Fund agreed in December 2006, with British Land in March 2007 and with Prupim in February this year.