Sainsbury's to make £200m from sale of property portfolio

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The Independent Online

Sainsbury's is close to selling its £200m property arm as part of a plan to focus on its struggling core retail business.

Britain's second largest supermarket group on Friday shortlisted three companies to buy the development business, which produces an operating profit of around £15m.

The list includes private property group Miller Developments, which is backed by Royal Bank of Scotland; construction company Kier Group; and private property company Castlemore Securities, with backing from Standard Life and HBOS.

Formed in 1993, J Sainsbury Developments has around 20 projects, mainly shopping centres. They include the Brewery in Romford, Essex; Lemon Quay in Truro, Cornwall; and Cuckoo Bridge Retail Park in Dumfries. The portfolio has a book value of £141m.

Sainsbury's refused to comment, but well-placed sources said that the three bidders had submitted offers around the £200m mark.

The news is a blow to quoted property heavyweights Land Securities, British Land and Hammerson, which all submitted bids but failed to make the shortlist.

Sir Peter Davis, chief executive of Sainsbury's, announced the sale of the property arm in February as part of his strategy to reverse the retailer's fortunes. The proceeds of the sale will help overhaul Sainsbury's 535-strong chain of stores and finance a push into higher-margin, non-food sales. Sir Peter wants 80 stores to have dedicated non-food offerings by the end of the year.

But Sainsbury's suffered a blow last week with the publication of data by market research firm Taylor Nelson Sofres showing Asda could soon overtake it as Britain's second supermarket chain. Sainsbury's has a 16.8 per cent share of the market; Asda's share is 16.3 per cent.