Tesco signs pounds 420m deal with British Land

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TESCO and British Land are creating a pounds 420m property joint venture to manage developments of superstores and shopping centres. It is the second such deal signed between the two companies and will enable Tesco to concentrate on its superstore business while the joint venture looks after property related issues.

It follows a similar deal between British Land and Great Universal Stores a year ago, under which GUS' pounds 900m property portfolio was injected into a joint venture vehicle in return for pounds 220m and a 50 per cent stake.

In this case Tesco is contributing seven shopping centre developments, including the Woodfield Retail Park in Bury and the Beaumont Leys centre in Leicester as well as two centres in Northern Ireland.

Tesco had acquired the schemes as a means of gaining the best sites in the centres but did not intend to hold them longer term. The seven centres have a combined value of pounds 120m. British Land is contributing the freehold of five Tesco superstores which are also valued at a combined pounds 120m. British Land acquired the stores via a sale and leaseback deal with Tesco. The joint venture will help hedge Tesco against rent reviews. Under the terms of the 50:50 partnership British Land will also make a balancing cash payment to Tesco.

The joint venture plans to build extensions to the Beaumont Leys shopping centre, Weston Favell in Northampton and the Kingston Centre in Milton Keynes.

Tesco shares closed 2.5p higher at 519p. British Land rose 25p to 760p.