Morrisons has agreed a significant property deal aimed at reducing its debt.
- The deal involves a 45-year ground rent agreement with Song Capital.
- Morrisons will generate income from 75 stores while retaining ownership.
- This agreement is part of a strategic move following a 2021 acquisition.
- Morrisons forecasts increased financial performance following the deal.
Morrisons, a major player in the supermarket sector, has finalised a property deal worth £331 million. This ambitious move involves a 45-year ground rent agreement with Song Capital, a real estate investor. The arrangement is designed to reduce the company’s existing debt, with Morrisons retaining ownership of the store freeholds.
The private equity-backed supermarket chain confirmed that this decision will allow it to continue owning the freehold of the properties. The income stream generated from 75 of its stores will contribute significantly to the intended debt reduction, which represents a crucial aspect of Morrisons’ financial strategy.
Announced alongside the retailer’s quarterly results, the £331 million deal coincides with a post-acquisition phase, following Morrisons’ buyout by Clayton Dubilier & Rice in late 2021. At the time of acquisition, there was a condition in place against disposing of the stores’ freeholds, which has since expired. Consequently, the supermarket stands to benefit from the resultant cash inflow, reinforcing its financial standing.
Jo Goff, Morrisons’ Chief Financial Officer, remarked on the positive performance across all sectors of the business, including supermarkets, online sales, and the wholesale segment. She stated, “Every part of Morrisons showed good growth in the quarter, representing a robust performance across a diversified business.” She further indicated that the proceeds from the transaction could potentially reduce the company’s debt by 41% from its peak, if utilised accordingly.
Looking into the future, Morrisons anticipates a rise in EBITDA and further operational improvements, illustrating strong confidence in its strategic financial decisions. The retailer holds the expectation that these efforts will continue to bolster its market position.
The strategic property deal is anticipated to significantly strengthen Morrisons’ financial health and operational efficiency.
