Sainsbury’s has set up a property partnership with British Land.

UK retail giant Sainsbury’s have announced the creation of a 10-year, £1.2 billion property Joint Venture (‘JV’) with British Land Ltd.

Justin King, Chief Executive of Sainsbury’s, said: “Today we have announced the investment of £273 million to create a £1.2bn property Joint Venture (‘JV’) with British Land. This allows Sainsbury’s shareholders to share in the significant value creation arising from the development opportunities across 38 Sainsbury’s superstores owned by the JV.”

The superstores, currently owned by British Land and leased to Sainsbury for 20 years, form the basis of the new 50:50 joint venture partnership.

It will have an initial life of 10 years, with an option to extend, and British Land will actively asset manage and administer the JV properties. The JV value of £1.2bn represents a net equivalent yield of 5.1%.

The consolidated net asset value for the new JV company is £544m including British Land’s existing £722m of outstanding securitised third party debt, which will be retained by the joint venture.

Stephen Hester, Chief Executive, British Land, said: “Today’s agreement more closely aligns the interests of property owner and retailer to deliver value to shareholders in both companies. It acts as a catalyst to increase capital value by improving, through extensions and developments, the Sainsbury Stores.”

Sainsbury’s was reporting on a good performance in fourth quarter trading, reporting like-for-like sales, excluding fuel, up 4.1%.

Shares in Sainsbury were 11½p or 3.4% higher in lunchtime London trading at 348p.