Tesco in £514m deal for shops' sale-leaseback

Tesco unveiled the latest scheme to release value from its property portfolio today, a £514 million deal with an unnamed UK pension fund.

The sale and leaseback transaction will see Tesco sell 15 of its stores and two distribution centres to a 50-50 joint venture company owned by the grocer and the fund, which has declined to reveal its identity.

Tesco has been doing similar deals since 2006 with the combined transaction value now topping £3 billion.

It aims to keep at least 70% of its properties on a freehold basis, a level it maintains with new store openings.

All properties will be leased back to the joint venture on 30-year RPI-linked leases, with an average initial yield of 5.2% for the stores and 6.3% for the distribution centres.

The move comes ahead of Tesco's half-year results announcement tomorrow when the supermarket group is expected to reveal more sluggish growth of late than rivals.

Others have seen sales rise by 6%, while analysts expect Tesco to manage a more sombre 3%-4%.

Tesco will also unveil details of its progress in the US, where it is likely to have racked up losses of around £80million in the last six months.

Tesco shares edged down 2.2p to 388.2p by late afternoon.

Tesco lost a skirmish last week with the Competition Commission which said it should have to pass a test if it wants to open a store in an area where it already dominates.