As part of chief executive Dave Lewis’s plans to strengthen UK business, British retailer Tesco has regained sole ownership of 21 superstores in a £733 million asset swap with British Land. These 21 superstores, valued at £352 million, were part of a joint venture between Tesco and British Land and were subject to rent increases linked to the retail price index (RPI).
In exchange for the superstores, British Land will take over Tesco’s stake in three shopping centres, three retail parks and three standalone stores which are held in two other joint ventures between the two firms. Those assets were valued at £381 million.
Tesco will continue to lease the stores at these sites at market rents that are not subject to RPI-indexed increases. As part of the deal Tesco will also receive £96 million from British Land. “This transaction with British Land allows us to increase our ownership, thereby insulating more of our businesses from indexed rent reviews,” states Lewis. “This agreement makes our business simpler and stronger.”
British Land said the deal was in line with its strategy to evolve its retail portfolio, further reducing its foodstore weighting, increasing its exposure to multi-let retail parks and shopping centres and would be accretive to earnings in 2016.