City and Business: M&S plans to rent its property

MARKS & SPENCER is considering plans to set up a company to own and extract more value from its property and land assets, which are worth more than pounds 3.5bn.

The idea was raised in an internal paper submitted late last year to the M&S board, says the property magazine, Estates Gazette. It forms part of a comprehensive review of company strategy started last summer after the retailer experienced a sharp downturn in trading. Setting up a separate property company is the most radical of a number of property-based financing options under review as this would allow the company to let or sell properties at market value.

Last week it emerged that the company has considered selling up to 40 high-street stores in order to raise around pounds 250m.

Roger Aldridge, head of estates and a main board director, said: "We are reviewing all our options, but the review won't be complete until July. Until then no decisions will be taken."

M&S is unusual in that its freeholds account for a high proportion of its property portfolio. Many of these are held in the books at historical cost which, in the case of stores bought many years ago, may be almost zero.

Sources said that an in-house property company could be run along similar lines to Chartwell Land, Kingfisher's subsidiary, which charges market rents to in-house "clients". It could mean charging economic rents for the first time . A source said that Mr Aldridge and financial services director Robert Colvill have argued that a shake-up could add shareholder value by generating a better return on the assets.

Last year, Mr Aldridge talked to British Land about property-based financing. The suggestions in the paper coincided with new chief executive Peter Salisbury's restructuring of M&S into UK retail, overseas retail and financial services.

The source said: "The minute the various profit centres have more informed valuations, they might start asking more questions, such as would the property have an alternative use that is more valuable? It might lead to splitting up stores and subletting to create profit rents. You have to balance that against retailers' reluctance to start paying true economic rents. Mr Aldridge and Mr Colvill are focused on shareholder value and return on assets. Are the rest of the board members happy to leave the assets as cosy boxes to sell knickers and chickens from?"

One insider speculated that the moves were, in part, defensive, designed to inflate profits after their dramatic collapse from pounds 452m to pounds 348m at the September 1998 half-year.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: DBA Developer - SQL Server

£30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Customer Service Administrator

£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...

Recruitment Genius: Dialler Administrator

£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...

Ashdown Group: Contracts Manager - City of London

£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...

Day In a Page

Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen
RuPaul interview: The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head

RuPaul interview

The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head
Secrets of comedy couples: What's it like when both you and your partner are stand-ups?

Secrets of comedy couples

What's it like when both you and your partner are stand-ups?
Satya Nadella: As Windows 10 is launched can he return Microsoft to its former glory?

Satya Nadella: The man to clean up for Windows?

While Microsoft's founders spend their billions, the once-invincible tech company's new boss is trying to save it
The best swimwear for men: From trunks to shorts, make a splash this summer

The best swimwear for men

From trunks to shorts, make a splash this summer
Mark Hix recipes: Our chef tries his hand at a spot of summer foraging

Mark Hix goes summer foraging

 A dinner party doesn't have to mean a trip to the supermarket
Ashes 2015: With an audacious flourish, home hero Ian Bell ends all debate

With an audacious flourish, the home hero ends all debate

Ian Bell advances to Trent Bridge next week almost as undroppable as Alastair Cook and Joe Root, a cornerstone of England's new thinking, says Kevin Garside
Aaron Ramsey interview: Wales midfielder determined to be centre of attention for Arsenal this season

Aaron Ramsey interview

Wales midfielder determined to be centre of attention for Arsenal this season
Community Shield: Arsene Wenger needs to strike first blow in rivalry with Jose Mourinho

Community Shield gives Wenger chance to strike first blow in rivalry with Mourinho

As long as the Arsenal manager's run of games without a win over his Chelsea counterpart continues it will continue to dominate the narrative around the two men
The unlikely rise of AFC Bournemouth - and what it says about English life

Unlikely rise of AFC Bournemouth

Bournemouth’s elevation to football’s top tier is one of the most improbable of recent times. But it’s illustrative of deeper and wider changes in English life
A Very British Coup, part two: New novel in pipeline as Jeremy Corbyn's rise inspires sequel

A Very British Coup, part two

New novel in pipeline as Jeremy Corbyn's rise inspires sequel
Philae lander data show comets could have brought 'building blocks of life' to Earth

Philae lander data show comets could have brought 'building blocks of life' to Earth

Icy dust layer holds organic compounds similar to those found in living organisms