UPDATE: Tesco Sells, Leases Back 14 Properties After Bond Sale
June 18 2009 - 12:00PM
Dow Jones News
Tesco PLC (TSCO.LN), the world's third-biggest retailer by
sales, Thursday said it has sold and leased back 14 properties
worth GBP458 million as part of its continuing program to extract
more value from its vast property portfolio in the U.K.
The move comes a day after it raised GBP431 million by selling a
commercial mortgage-backed bond that gave hope to the global
securitization market. It was the first CMBS that has been sold to
private investors in Europe or the U.S. since the start of the
credit crisis, and appealed to investors because it was simply
structured.
Tesco said it will sell and lease back 12 stores and two
distribution centers in a deal that will be structured as a 50-50
joint venture with Tesco Pension Trustees Ltd.
It carried out a similar deal last August, when it sold and
leased back 13 properties worth GBP605 million. The properties were
sold to the Universities Superannuation Scheme, a U.K. pension
fund; Prupim, the property-investment arm of U.K. insurer
Prudential PLC; LaSalle Investment Management, a unit of Jones Lang
LaSalle Inc., and Canada Life Assurance Co.
Tesco's latest property sale and lease back deal is consistent
with the group's strategy, Seymour Pierce analyst Freddie George.
He has a buy rating on Tesco, noting the retailer is his favourite
stock within the U.K. grocery sector because of its potential at
home within non-food and oversees operations.
Tesco has sold and leased back properties worth GBP2.66 billion
since 2006, a company spokeswoman said. Tesco had 2,282 stores and
30 distribution centers in the U.K as at Feb. 28. The group owns
around 80% of its property.
The 14 properties have a gross internal area of more than 2.3
million square feet, and will be leased back to the joint venture
on 30-year Retail Prices Index-linked leases, with an average
initial yield for the stores of 5.2% and 6.3% for the distribution
centres.
Tesco, the U.K.'s biggest retailer, said the transaction is
being primarily funded by the issue of the commercial
property-backed bonds by Tesco Property Finance 1 PLC, the
debt-issuing entity of the joint venture, credit-linked to
Tesco.
At 1526 GMT, Tesco shares were up 1 pence, or 0.2% at 357 pence
in a higher London market. The stock has lost 6.6% of its value
over the past 12 months.
-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290;
lilly.vitorovich@dowjones.com