Tesco mulls REIT venture

Tesco is understood to be considering putting its freehold property portfolio, valued at£12 billion, into a Real Estate Investment Trust (REIT) in order to improve shareholder returns.

The initiative would enable the grocer to put its property investment into a separate listed company and use the money raised from selling shares in the REIT to buy back its own shares.

The venture would ensure Tesco's property asset valuations reflect their real worth more accurately. At the moment, the belief is that the value is not accurately reflected in Tesco's share price.

Chancellor Gordon Brown announced final plans for REITs in his Budget on Wednesday, enabling businesses to place property in the vehicles from January 1 next year. Tesco is thought to have been considering the proposals for some time, and Wednesday's announcement has brought the plans one step closer.

No comment was available from Tesco.