Asda has drawn up plans to sell the land under one of its London superstores to a developer as the debt-laden business seeks to cash in on its property holdings.
The supermarket, which is co-owned by the billionaire Issa brothers and TDR Capital, will sell the freehold, subject to planning consent, of its 10-acre Park Royal superstore in Ealing to Barratt, Britain’s biggest housebuilder.
Barratt plans to redevelop the site into a new 60,000 sq ft Asda store and build 1,500 houses, with Asda boasting that the project will deliver a new “town centre” in north west London.
Financial terms of the deal were not disclosed but are significant. Craig Carson, managing director of Barratt West London, said it was “one of the market’s largest land transactions since 2019”.
The deal comes as Asda races to cut its debts, which stood at £3.8bn at the end of last year.
The borrowings were taken on during its 2021 takeover but surging interest rates since then have shouldered the company with large debt interest payments. Last year it spent £441m on interest.
Earlier this month, Asda refinanced £3.2bn of its debt, pushing the majority of its maturities into the next decade. Finance chief Michael Gleeson said at the time the transaction would “strengthen our balance sheet”.
The land sale will also bolster Asda. Ian Lawrence, head of mixed-use developments at the supermarket, said the deal with Barratt would be “a double windfall for the business” – Barratt will pay the cost of building the new superstore, estimated at £30m, as well as paying for the land.
“We’re getting a brand new store built for us free of charge as well as any land proceeds,” he said.
Asda will pay a peppercorn rent for the new store.
Like other supermarkets, Asda sits on a massive landbank, and sale-and-leaseback arrangements offer a way to cash in on the value.
Mr Lawrence said Asda plans to sell six other sites in London for redevelopment, with capacity to build 10,000 homes over the next five to six years.
As well as delivering financially for Asda, it offers a potential solution to an intense housing crisis in the capital. There is an extreme shortage of homes, which is driving record rent growth.
Mr Lawrence said: “Our aspiration to do this dovetails with the fact that there is a profound housing crisis and therefore the two should be compatible.”
The plan marks a shift for Asda but the chain is following in the footsteps of rivals such as Tesco and Sainsbury’s.
Sainsbury’s sold its Fulham Wharf site to Barratt for conversion into residential properties in 2012. Newsteer property consultants began working with Tesco on how to repurpose parts of its land portfolio in 2015.
Supermarkets have huge land holdings in locations that are prime for development, but they have little capacity or appetite to do the work themselves. Getting planning permission is like pulling teeth, build costs have soared and supermarkets are reluctant to close their stores while the redevelopment is underway. Most therefore choose to outsource.
The notable exception has been John Lewis Partnership, which owns Waitrose. It has outlined plans to build 10,000 build-to-rent homes over 10 years, as part of an effort to get 40pc of its profits from housing and finance under chairman Dame Sharon White.
However, the project has illustrated the hurdles of taking on such a development directly. John Lewis has had to deal with local opposition to its two flagship projects in London and must appease everyone from councils to fire authorities. Ms White’s 40pc target has since been scrapped as part of a broader strategy rethink.
While housing is a headache for supermarkets, developers are only too keen to take on the challenge. Large sites in central London available for building on are scarce.
Ross Bettridge, director at Newsteer, which is advising Asda on the deal, said: “For developers, what really grabs their appetite is that some of these supermarkets are in great locations.
“In London there are not many 1,000-plus unit opportunities. That is the real draw for them. It’s worth the pain in order to grab those opportunities.”
However, Mr Lawrence cautioned: “We still have very challenging economic headwinds at the moment and that undoubtedly affects the viability of these things. Build cost inflation has been quite significant in the last couple of years. That makes things very expensive to deliver.”
The planning system is painfully slow and building safety requirements have brought new regulatory hurdles.
“If the planning takes too long or there are two many challenges around it, they won’t happen.”
Mr Lawrence was formerly a property development executive at Tesco. He joined Asda in 2021, after the supermarket was bought by the Issa brothers.
“I joined [Asda] to do this. We obviously had an awareness of what other retailers were doing, and it was something we wanted to get on board with and move forward with.”
This kind of deal is only viable in London, where house prices are high enough to offset the costs of redeveloping a supermarket store, Mr Lawrence said.
“It’s ballpark £25m to £30m to build a new, very large supermarket. Outside of London, the metrics don’t work for that.”
These projects only make sense when the housebuilder can sell flats for at least £700 per sq ft, said Mr Bettridge. The average home in Ealing costs £684 per sq ft, according to Stirling Ackroyd estate agents, meaning a typical new home in the area costs £568,706.
Asda is looking at other ways to cash in on its land outside the capital, Mr Lawrence said.
“We have surplus car parks where we could do other uses such as retirement living or student living, if it’s in the right location.”
Efforts to monetise Asda’s land holdings come as it fights to hold on to customers in a fiercely competitive market.
Asda’s market share dipped to 12.6pc in the 12 weeks to April 20, according to recent NIQ figures, down from 13.3pc a year earlier. Similar figures from Kantar put Asda as the only one out of the “Big Four” supermarkets to lose market share.
Earlier this month Asda pledged to spend £70m cutting prices.
https://news.google.com/rss/articles/CBMiYmh0dHBzOi8vd3d3LnRlbGVncmFwaC5jby51ay9idXNpbmVzcy8yMDI0LzA1LzE0L2FzZGEtYnVpbHQtaG91c2VzLW5vcnRoLXdlc3QtbG9uZG9uLWN1dC1kZWJ0LXBpbGUv0gEA?oc=5
2024-05-14 06:00:00Z
CBMiYmh0dHBzOi8vd3d3LnRlbGVncmFwaC5jby51ay9idXNpbmVzcy8yMDI0LzA1LzE0L2FzZGEtYnVpbHQtaG91c2VzLW5vcnRoLXdlc3QtbG9uZG9uLWN1dC1kZWJ0LXBpbGUv0gEA
Tidak ada komentar:
Posting Komentar