General – UK, Sainsburys takes £0.9bn property write-down

Sainsbury'sProperty values at UK supermarket Sainsbury’s have decreased during the past year by £0.9 billion to £11.1 billion, mainly due to a reduction in market rental values.

The write-down comes two weeks after reported that Tesco had taken a £4.7 billion impairment charge on its property portfolio.

As a result of the review of Sainsbury’s supermarket estate, it now has taken an impairment charge against some of its trading stores and withdrawn from a number of schemes in the property pipeline that are unlikely to achieve an appropriate return on capital.

During this financial year Sainsbury’s opened eight supermarkets (of which two were replacement stores), extended five, refurbished 13, and closed one.

Sainsbury’s will add only around 450,000 square feet of new space in each of the next two financial years, predominantly focused on convenience stores.

Tesco’s property review has also led it to exit plans to build out 49 stores and a significant reduction to its store building programme.

Despite a £0.9 billion decline in its property valuation, Sainsbury’s said it will aim to maximise the value of their property assets by working with joint venture partners to deliver new leisure, residential and commercial opportunities whilst adding trading space to its estate.

The supermarket is delivering over 1,500 new homes across London. Their £500 million project with Barratt London at Nine Elms will complement the new tube station development and will open in 2016/17. It will deliver 737 new homes, a new Sainsbury’s store and 27,000 square feet of local shops, restaurants and office space. There are also plans for a replacement store at Whitechapel Square in Tower Hamlets alongside 600 new homes and improved public space surrounding Whitechapel Station. Mixed use development schemes are expected to deliver property profits of around £200 million in the next two years.