Tesco enters property venture - commercial mortgages

23 March 2007

Tesco has announced its entry into a joint property venture with British Land, under which more than 20 large Tesco outlets will be leased.

It has been confirmed that the initial annual rent of the venture will be £29 million, with 21 Tesco superstores included in the venture. British Land is currently the second largest real estate investment trust in the country.

Lasting for a period of 20 years the new joint venture will see increased rents on an annual basis, capped at 3.5 per cent.

Tenants will have the opportunity to rent the properties during this period, which could offer a viable alternative to commercial mortgages for businesses looking for mid-term opportunities.

Speculation over Tesco''s property portfolio has continued since the introduction of real estate investment trusts (REITs) at the start of the year. Putting properties into a REIT structure would leave the retailer unable to retain ownership.

The new joint venture is expected to make up to £5 billion worth of capital available over five years.