Morrisons, the supermarket chain, has struck a £370m deal to unlock value from its vast property portfolio as its owners seek to further shrink the company’s debt pile.
Sky News has learnt that the private equity-backed grocer has agreed a mammoth ground rent transaction with Song Capital, a real estate investor.
Under the deal, which could be announced alongside Morrisons‘ quarterly results on Thursday,
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Song Capital will pay £370m for the right to receive an income stream from 75 of the chain’s supermarkets for the next 45 years.
Morrisons will retain ownership of the stores’ freehold.
The deal comes more than three years after the Bradford-based retailer was taken private by Clayton Dubilier & Rice (CD&R) in a transaction valued at close to £10bn including debt.
Morrisons has endured a turbulent time since then amid the recovery of Tesco, the market leader, and the rise of discounters Aldi and Lidl.
Last year, the company named Rami Baitieh, a former Carrefour executive, as its new boss in an attempt to arrest its decline.
AdvertisementHis appointment has begun to yield results, with improvements to Morrisons’ profitability and a reduction of net debt from a peak of £6.2bn to about £4bn.
During a hotly contested battle to buy the supermarket chain, CD&R pledged not to engage in significant disposals of store freeholds for a limited period.
The deal with Song Capital comes after the expiry of that undertaking but in any case does not involve a change of ownership of the properties involved, a source said.
Asda, the other big British supermarket to be owned by private equity backers, has also struck sizeable real estate deals to release value from its property portfolio.
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The agreement with Song Capital – which according to its website was set up by Dan MacKinnon and Tom Pritchard – is the largest store-based transaction involving Morrisons since CD&R bought the company.
CBRE, the property agent, is understood to have advised Morrisons on the deal with Song Capital.
Morrisons and CD&R declined to comment, while Song Capital did not respond to a request for comment.