The shares of Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) were flat at 331p in early London trade this morning after the UK’s largest retailer announced a sale-and-leaseback property deal in South Korea.
The agreement will involve Tesco receiving £355m for the sale of four of its stores, which operate under the Homeplus brand in the region.
This isn’t the first time Tesco has looked to extract value from its property portfolio in South Korea — it struck a similar four-store deal in August 2012. By taking these steps, the company is unlocking cash from its property base, but also moving toward a less capital-intensive business model.
It’s well known that Tesco is a very significant owner of retail-focused real estate globally. Arguably though, its “mall type” offerings in Asia are more potentially attractive for this kind of deal, from the buyer’s point of view. In the UK by comparison, much of Tesco’s land might be impractical for use by anyone but Tesco itself. In many Asian countries however, Tesco’s position as a mall operator is prominent, and potentially under-appreciated by investors.
The purchaser of the properties is real estate group Samsung SRA, and the deal reflects Tesco’s more cooperative, conservative approach to making the most of its international operations.
