Tesco is reported to be in talks over raising up to £500 million through the sale of some stores.
The sale and leaseback deal is expected to be completed with weeks, property executives claimed. A major British pension fund is understood to be the buyer, with the sale used to reduce Tesco’s debt.
As with previous sale and leasebacks, Tesco is expected to form a 50/50 joint venture with the pension fund allowing it to retain some element of control over the portfolio and future rent increases.
The retailer signed similar sale and lease back deals with British Land and the British Airways Pension Fund last year, raising more than £1 billion. They were part of plans of plans to free up to £5 billion of capital from property over five years. Other retailers, including Sainsbury’s, have also done similar transactions.
Supermarket chains have been under increasing pressure to unlock the value in their large freehold properties. Tesco’s property portfolio – which includes more than 2,100 UK stores – is estimated to be worth £31 billion.
News of the latest talks come amid closer scrutiny over the group’s debt position. Ratings agency Moody’s last month downgraded Tesco following the retailer’s acquisition of the Royal Bank of Scotland’s 50 per cent stake in Tesco Personal Finance for £950 million.
That followed the purchase in May of 36 hypermarkets in South Korea for £958 million. James Anstead, a retail analyst at Citi, said: “The market is watching Tesco’s debt more closely than for a long time.
“The fact that the company has made two sizeable acquisitions in short order and continues to run the heaviest capital investment programme in the sector has begun to raise a few eyebrows – as shown by several credit rating agency downgrades in the aftermath of the Tesco Personal Finance deal.”