Sainsbury’s forks out £431m to buy 21 store freeholds as it looks to dump lease liabilities
Sainsbury’s has secured a £430.9m deal to buy the freeholds of 21 supermarkets from real estate investment group Supermarket REIT.
The grocery chain has acquired the remaining 51 per cent stake it did not already own in the Highbury and Dragon investment – which is a portfolio of stores Sainsbury’s acquired a 49 per cent stake in when it was formed in 2020.
As part of the deal, Sainsbury’s is buying the remaining supermarkets which it previously rented and the sites will continue to operate under the grocer’s brand.
However, there are five other stores that remain within the portfolio that Sainsbury’s is looking to sell; Supermarket REIT could purchase four of these for £33.2m.
“We are pleased to have reached a positive outcome to conclude our joint venture and look forward to continuing to work with Supermarket Income REIT in the future,” said Patrick Dunne, director of group property at Sainsbury’s.
In September, Sainsbury’s revealed that it was in discussions to sell more than a dozen stores to real investment trust LXi REIT for around £500m.
The deal would include a portfolio of some 18 stores that are mostly situated in the south of England.
“The grocery sector is particularly under pressure on cost margins both from consumers looking for lower prices and better value, and producers looking for a higher and fairer price for the products they sell to them,” Rebecca Crook, chief growth officer, CI&T told City A.M.
“All retailers are going to need to take bold moves across their portfolio and operations in how they extract profit, therefore the Sainsbury’s news to purchase freeholds makes solid financial sense.”
She continued: “Typically, a lease is a liability – at a time when costs are being squeezed for retailers, owning the freehold gives Sainsbury’s the property as an asset which they will ultimately have more control over.”