Tesco in sale and leaseback deal

A Tesco supermarket is seen in west London December 1, 2008. REUTERS/Toby Melville

LONDON (Reuters) - The country’s biggest retailer, Tesco, said on Monday it had carried out a sale and leaseback deal for property assets valued at 514 million pounds.

The transaction, structured as a 50-50 joint venture with an unnamed UK pension fund, represents the latest phase in the firm’s ongoing programme to release value from its property portfolio.

The deal involves 15 Tesco stores and two distribution centres, with the properties having a gross internal area in excess of 2.7 million square feet.

The properties will be leased back to the joint venture on 30-year Retail Price Index (RPI) linked leases, with an average initial yield of 5.2 percent for the stores and 6.3 percent for the distribution centres.

The deal is being funded primarily by fixed rate notes issued by Tesco Property Finance 2 -- the debt issuing entity of the joint venture.

Shares in Tesco, which publishes first-half results on Tuesday, were down 0.9 percent at 386.7 pence.

Reporting by James Davey, editing by Myles Neligan