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Tesco signs property swap with joint-venture partner on 21 stores

Published:  20 March, 2015

Tesco has signed a deal to regain full ownership of 21 superstores that it owned-jointly with a property investment company.

The move will increase the number of freehold stores the retailer owns and help bring down rents paid on its property.

The 21 stores, along with associated debt, were jointly-owned by Tesco and London-based firm British Land and all were subject to RPI-indexed rent increases.

Tesco is swapping the stores for 3 shopping centres, 3 retail parks and 3 standalone stores were also held in  joint-venture. Although British Land will take full ownership of these properties, 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 transaction, Tesco will also receive £96m from British Land.

Tesco CEO Dave Lewis said the move was part of the Tesco strategy to strengthen its core UK business. "Last year we identified the opportunity to increase the proportion of our stores we own as freehold. This transaction with British Land allows us to increase our ownership and thereby insulate more of our businesses from indexed rent reviews. We have a long way to go but it's a transaction which takes us in the right direction. This agreement makes our business simpler and stronger," he said.

In January, the retailer kicked off a plan to turn around the business followign falling sales over the all-important Christmas period, which saw like-for-likes down 2.9% in the 19 weeks-period and 0.3% over the six weeks of Christmas

Chief executive Dave Lewis confirmed 43 Tesco stores were to close - many of them convenience outlets - and a further 49 future store developments were shelved.

However, Kantar data published earlier this month showed Tesco had started to stem its loss of market share, growing at the same 1.1% rate as the market.