Tesco revealed details of a sale and leaseback with PruPIM today, as part of its £5bn-plus property programme.
Tesco, in its results for the year to 23 February 2008, revealed it had completed a £207m sale and leaseback deal with PruPIM at a 4.8% yield.
The deal is the third since Tesco revealed a new £5bn property plan last year which took the total earmarked for property sale and leasebacks and joint ventures to close to £9bn.
It completed two transactions in 2007 which raised £1.2bn for the supermarket giant.
The first of these deals, with the British Airways Pension Fund, was a £445m deal completed at the end of the 2006/7 financial year. The second, a £650m deal with British Land, completed in March 2007.
Still an appetite for Tesco property
Tesco said in a statement: ‘Whilst yields have increased modestly in recent months, appetite for Tesco's property and covenant remains strong, and if market conditions remain conducive, we expect to be able to complete further transactions on attractive terms in the months ahead.
It added: ‘We are currently in discussion with potential counterparties.’
Share buy-back programme funded
The proceeds from the property deals will be used to fund expansion and its share buy-back programme - which has so far re-purchased Tesco shares worth over £1.1bn.
The net book value of Tesco’s fixed assets is £19.8bn, up from around £17bn estimated last year. Most of this value is in its freehold store portfolio.
It estimates the current market value to be £31bn, representing a 57% premium to book value.
In its results it posted an underlying pre tax profit of £2.8bn, up 11.8% on last year.
It said: ‘We have seen a strong start to the new financial year across the group. UK like-for-like sales growth, excluding petrol, was over 4% in the first five weeks of the new year.’