Tesco and British Land form joint venture
The country's biggest retailer Tesco said on Wednesday it had formed a 650 million pound property joint venture with British Land covering 21 of its supermarkets.
Tesco said the deal would generate net proceeds of 570 million pounds and that it was the second phase of a property sale and leaseback programme announced in April 2006.
"The venture enables Tesco to release funding for its future growth, whilst maintaining the flexibility to operate and adapt its property assets," it said.
The 21 stores for the 20 year deal account for around 3 percent of Tesco's UK property assets by square footage.
British retailers including Tesco and its rivals Sainsbury have been under growing investor pressure to unlock values from their huge property assets.
Tesco, which pledged last year to free up cash from its property assets and return 1.5 billion pounds to shareholders in the form of a share buyback, announced a similar transaction with British Airways Pension fund in January, raising 445 million pounds.
The transaction announced on Wednesday is Tesco's fourth property venture with British Land. Goldman Sachs is the sole debt provider for the deal.
The deal has an initial rent of 29 million pounds, giving an initial yield of around 4.5 percent.
Shares in Tesco closed on Tuesday at 435 3/4 pence and British Land finished at 1,537p.
(additional reporting by Mark Potter)
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