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
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Guru Careers: Graduate Editor / Editorial Assistant

£16 - 20k: Guru Careers: A Graduate Editor / Editorial Assistant is needed to ...

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Day In a Page

Raif Badawi: Wife pleads for fresh EU help as Saudi blogger's health worsens

Please save my husband

As the health of blogger Raif Badawi worsens in prison, his wife urges EU governments to put pressure on the Saudi Arabian royal family to allow her husband to join his family in Canada
Birthplace of Arab Spring in turmoil as angry Tunisians stage massive sit-in over lack of development

They shall not be moved: jobless protesters bring Tunisia to a halt

A former North African boom town is wasting away while its unemployed citizens stick steadfastly to their sit-in
David Hasselhoff's new show 'Hoff the Record': What's it like working with a superstar?

Hanging with the Hoff

Working with David Hasselhoff on his new TV series was an education for Ella Smith
Can Dubai's Design District 'hipster village' attract the right type of goatee-wearing individualist?

Hipsters of Arabia

Can Dubai’s ‘creative village’ attract the right type of goatee-wearing individualist?
The cult of Roger Federer: What is it that inspires such obsessive devotion?

The cult of Roger Federer

What is it that inspires such obsessive devotion?
Kuala Lumpur's street food: Not a 'scene', more a way of life

Malaysian munchies

With new flights, the amazing street food of Kuala Lumpur just got more accessible
10 best festival beauty

Mud guards: 10 best festival beauty

Whether you're off to the Isle of Wight, Glastonbury or a local music event, we've found the products to help you
Unai Emery’s passion for winning and eye for a bargain keep Seville centre stage in Europe

A Different League

Unai Emery’s passion for winning and eye for a bargain keep Seville centre stage in Europe, says Pete Jenson
Amir Khan and James DeGale’s remarkable Olympic performances were just the start of an extraordinary journey - Steve Bunce

Steve Bunce on Boxing

Amir Khan and James DeGale’s remarkable Olympic performances were just the start of an extraordinary journey
Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf