Sainsbury’s has exchanged contracts on a £500 million sale and leaseback deal for 18 stores with London-listed real estate investor LXi REIT.
The agreement, which is yet to be officially completed, will see the supermarket selling 18 of its stores – which are prime sites located across the south of England – to real estate investment trust LXi and then lease them back.
LXi has confirmed that contracts have now been exchanged for the store portfolio but says completion of the deal will be dependent on it securing an equity fundraising. It is currently in discussions with investors over a possible share sale, as well as taking on new debt, to finance the purchase.
Sainsbury’s first confirmed that the deal was on the table yesterday, when it also announced it had reached agreement on the price it will pay to fully buy out 21 stores from the Highbury and Dragon investment vehicles.
The supermarket said the money raised from the LXi sale and leaseback arrangement would be used to part-fund the Highbury and Dragon deal.
Sainsbury’s has held a 49% stake in the Highbury and Dragon sites since they were set up in 2000.
The Highbury and Dragon acquisitions are expected to complete in the first half of the financial year to March 2024.
The retailer told the London Stock Exchange that both deals “would result in a broadly unchanged proportion of leasehold and freehold Sainsbury’s supermarkets, with ownership and lease structures better reflecting current market conditions and our priorities”.
The moves also come as retailers look to bolster their balance sheets, in particular as they battle to keep a lid on price hikes in the face of soaring inflation while protecting their profit margins.
The sale and leaseback deal with LXi follows some months after it first emerged that Sainsbury’s was looking to sell the sites, and a number of other suitors are understood to have been interested.
