Sainsbury Agrees to £1.2 Billion Sale Leaseback of 38 UK Supermarkets

Telegraph - March 27, 2008

Supermarket chain J Sainsbury has struck a £1.2bn property deal with developer British Land by placing 38 of its stores into a joint venture.

The purpose of the deal is to improve those stores, which were owned by British Land and leased back to Sainbury's on 20-year agreements, through extensions and developments. Sainsbury's chief executive, Justin King, has been under pressure to extract more value from its property portfolio.

Twenty-five of the 38 stores, which are valued at £1.2bn, have already been earmarked for expansion, increasing net selling area by about 500,000 sq ft. The joint venture also owns one Waitrose store.

Sainbury's is investing £273m into the 10-year partnership, and said that the deal was in line with its strategy of increasing control of those supermarkets which have development potential, while selling off its fully developed stores.

Last year the retailer came under pressure from 5pc shareholder Robert Tchenguiz, the property entrepreneur, to sell off its freehold property and return cash to shareholders.

Referring to the joint venture, Sainsbury's chief executive Justin King, said: "This venture is an excellent opportunity for Sainsbury's to increase our interest in the future extension and development of many of our most important stores. "This will enable us to enhance the customer offer, increasing both the trading and property value of these assets."

British Land is the biggest owner of supermarkets, after retailers themselves, in the UK. Its total supermarket portfolio includes 97 stores, valued at £1.96bn. Sphere: Related Content