British Land in £429m Sainsbury’s superstores sell-off

Property giant British Land on Tuesday slashed its exposure to struggling out-of-town hypermarkets, with a £429 million deal to offload the bulk of its Sainsbury’s superstores.

A joint venture between the FTSE 100 firm and Sainsbury’s has agreed to sell 12 shops to US investor Realty Income Corporation, which makes its UK debut. After debt and other costs are paid, the sellers will respectively get £95 million and £133 million.

The exit comes 11 years after British Land and Sainsbury’s teamed up. Since then the supermarkets industry has grappled with competition from discounters Aldi and Lidl, and a number of shoppers using smaller High Street convenience stores.

British Land, which wants to cut its retail portfolio size to 30%-35% from 50% by 2024, said it wants to focus on London offices, rental homes and shops within mixed-use projects.

Once today’s deal completes, British Land’s superstores exposure decreases to 1.3% of its portfolio at six shops. It warned there are “clear challenges currently in the retail market”. The shares fell 5.4p to 590.2p.

For Sainsbury’s the transaction means it can rent the buildings from the new California-headquartered owner, but remove the costs associated with being a landlord. The retailer can also capitalise on the value of the assets

UBS advised Realty Income.