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LONDON-British retailer Tesco may transfer one of the country's largest freehold retail portfolios into a REIT. A Tesco spokesman confirmed reports that the supermarket giant would consider the move for its euro 17.4-billion ($20.8-billion) freehold property. "We are always looking at the different possibilities, the spokesman tells GLobeSt.com, "and, of course, we won't rule anything out, but there is nothing major on the cards right now."

Tesco shares jumped 5% to a new high on reports that it would attempt to extract more value from property assets. Other retailers are also expected to consider REITs, not least because the value of some of the portfolios is greater than the market capitalization of the entire business.

This difference has prompted a number of hostile bids by property entrepreneurs. One of the highest-profile attempts was the unsuccessful bid by Philip Green for Marks & Spencer two years ago.

As GlobeSt.com reported earlier this week, the government set out the terms for REITs in its annual budget on Wednesday, with a view to introducing them in January.It proposed that REITs will be quoted property vehicles that distribute 90% of their income to shareholders in return for not paying any corporate tax. A charge of 2% of gross assets will be levied on creation of the REIT.

Of course, REIT status is not the only choice. Another option is the use of CMBS. Earlier this week, rival supermarket group J. Sainsbury sold two mortgage-backed securities worth euro 1.7 billion ($2.1 billion).

Instant Insights /

Tesco Mulls REIT Status for $21B Portfolio

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