Sainsbury’s in talks to sell 18 stores in £500m sale and leaseback deal

Supermarket Sainsbury’s has confirmed talks with a London-listed real estate investor to sell and leaseback 18 stores in a deal worth around £500 million.

The proposed agreement would see Sainsbury’s sell the stores, which are located across the south of England, to real estate investment trust LXi REIT and then rent them back.

LXi is in discussions with investors over a possible share sale to raise some of the funding for the deal.

Sainsbury’s also said it had separately reached agreement on the price it will pay to fully buy out 21 stores from the Highbury and Dragon investment vehicles.

The grocer said the cash from the proposed sale and leaseback deal with LXi REIT 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 retailer added 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.