Sainsbury's unveils hotels and health clubs strategy

Shoppers at Sainsbury's may soon be able to check in for a swim or even an overnight stay. The supermarket group announced yesterday it was hiving off its property interests into a separate division and that a key plank in its strategy would be to develop hotels, leisure centres, office blocks and apartments.

Shoppers at Sainsbury's may soon be able to check in for a swim or even an overnight stay. The supermarket group announced yesterday it was hiving off its property interests into a separate division and that a key plank in its strategy would be to develop hotels, leisure centres, office blocks and apartments.

The group, which has a UK property empire worth £4.5bn, including 440 stores, said it hoped to generate £300m by exploiting "development opportunities" over the next four years. It is already discussing with the London borough of Lambeth a proposal to build a hotel, residential units and a leisure centre at its Nine Elms store in Vauxhall, south London. Plans are also in the pipeline to develop stores in Maidenhead, Peterborough and High Wycombe.

The group said the restructuring, which will see the property division split into three functions, would create annual capital expenditure savings of £35m. Sainsbury's owns the freehold of 65 per cent of its property portfolio and this year it has already raised £566m through a sale and leaseback scheme, selling 26 of its stores in a package financed by asset-backed debt.

"Our early negotiations with Lambeth have been encouraging. They love the scheme and are upbeat about it but it's a sea change from what they expected," Ian Coull, group property director, said yesterday.

"If customers want to, they [will be able to] go to a health club, have a massage and then do their shopping," he added. Sainsbury's hopes to develop up to 40 stores initially. In Vauxhall, the plan is to construct two tower blocks above the existing store in a joint venture with the property company Stannifer.

An analyst at Dresdner Kleinwort Benson said: "The supermarkets have thought about using their car parks for other things, such as selling cars, but no one has actually done it yet. This must be good news for shareholders."

Shares in the company fell 5.5p to close at 355p.