Selfridges, the department store group, is considering mortgaging its flagship store on London's Oxford Street and returning up to £360m in proceeds to shareholders.
Selfridges owns the freehold on the site which is worth £358m according to the last valuation carried out two years ago. This is more than Selfridges' entire stock market valuation of £340m. A fresh valuation is likely to put an even higher price on the store.
It is understood that Peter Williams, the company's former finance director who has just taken over as chief executive from Vittorio Radice, is aware that Selfridges' capital structure is not as efficient as it might be. The matter is being actively discussed by the board though it is thought no announcement is imminent.
Selfridges is seeking locations for new stores in Bristol, Leeds and Newcastle and wants to be more certain of the costs of securing these sites before it presses ahead with a re-structuring of its property assets.
It is thought that Selfridges has ruled out a sale and leaseback on the prestigious Oxford Street store. This is because the group wants to retain control of the building in order to make further improvements.
News of the balance sheet restructuring at Selfridges is likely to be well received in the City which marked down the company's shares in December when Mr Radice quit to join Marks & Spencer as head of its home furnishings division. The move would help Mr Williams make his mark as the new chief executive.
Some analysts have said Selfridges could become a takeover target as the department store sector begins to consolidate. Any bidder would be attracted by the group's property assets.
Selfridges has three branches, one on Oxford Street and two in Manchester but it is keen to reduce its dependence on the capital. A fourth branch is due to open in Birmingham in September and a fifth in Glasgow in 2007.
Baugur, the Icelandic retailer, acquired a 1 per cent stake in Selfridges last month.
Selfridges is due to report its full-year results on 20 March. In January its Christmas trading statement was marred by the effects of terrorist threats and tube strikes. Group like-for-like sales were up by 2 per cent on the previous Christmas.
Britain's biggest department store groups have realised that full ownership of their properties is not the best use of their capital.
Mohamed Al-Fayed, the owner of Harrods, remortgaged the famous Knightsbridge store with Royal Bank of Scotland in 2001, raising some £350m to pay down debt and fund rebuilding and refurbishment work. However, late last year he turned down an offer from British Land to sell Harrods then lease it back.
House of Fraser struck a property deal with British Land in order to raise cash to refurbish key branches such as the former DH Evans store on Oxford Street which now trades under the House of Fraser name.
Marks & Spencer last year undertook a major sale and leaseback on a number of sites and returned the funds to shareholders. However, the company retained full control of key outlets such as Marble Arch in London.
Selfridges declined to comment on its plans.
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