Tesco shaved another sliver off its debt pile today, flogging off £250m-worth of land once earmarked for new supermarkets. What with the ‘space race’ over and the UK suffering from a major housing shortage, Britain’s big supermarkets may well be thinking their unwitting property tycoon status is the answer to their prayers.
The 14 sites Tesco sold to property investment firm Meyer Bergman could soon be home to as many as 10,000 new houses. A relatively happy end for some of 49 planned supermarkets it axed in January, at the same time as closing 43 unprofitable stores (although many local communities bemoaned the loss of promised jobs).
Meanwhile, bitter rival Sainsbury’s has built flats on top of its expanded Fulham store, and was planning more elsewhere when MT spoke to boss Mike Coupe in June. ‘Technically, in terms of how much we own, we're the third largest property company in the UK,’ he said.
Whether it’s selling off dead-in-the-water superstore land or building homes themselves, taking advantage of the UK’s mad property market is a no-brainer for big supermarkets. And it will help soak up some of the price cuts and falling sales they’re incurring at the hands of Aldi and Lidl.
There is, however, an unquenchable thirst for flats in the capital and the sites Tesco sold were in London, the south east and well-heeled south western bolthole Bath. As the BBC’s Kamal Ahmed pointed out, it’s a lot harder to shift derelict sites in areas where the property market isn’t quite so red-hot.
And while every little helps, £250m is small change compared to Tesco’s £17.7bn debt, down from £21.9bn after it sold its South Korean business for £4.2bn in September. As it reported last week, its sales decline has slowed, but its first-half profits nonetheless fell 55% to £354m.
Investors were pretty blasé about today’s deal: Tesco shares were up a mere 0.1% to 192.5p in mid-morning trading, behind the FTSE 100. Property plays will help, but the big supermarkets are still just that – supermarkets.