LONDON-Ailing retailer Marks & Spencer has concluded the long-awaited sale & leaseback of a portfolio of high street stores across the UK. The privately owned Topland Group has agreed to pay £348 million ($505 million) for 78 freehold and leasehold stores, which it will then lease back to M&S.

The terms of the leases have been structured to ensure maximum operational flexibility for M&S. The initial term expires in March 2027 and the initial rent payable by M&S is £24.6 million ($35.7 million) per annum. But rather than face the traditional five-yearly rent reviews, the leases allow for fixed annual rent increases of between 1.5% and 1.9%.

At the same time, M&S has the ability to vacate up to one third of the properties without penalty, and it also has the right to renew any of the leases for terms of up to 40 years. Marks & Spencer and Topland will share any profits accruing from the redevelopment of the vacated properties.

M&S Executive Director Robert Colvill said: ‘The quality of this portfolio and the unique partnership opportunity has attracted a high level of interest from a broad range of potential investors. Topland’s expertise will enable us to extract further value from our estate whilst providing the occupational flexibility needed to support our revitalised trading plans.’

And Colvill made it clear that this would not be the last time M&S raised capital from its property assets. He said the company was looking at the securitisation of other portfolios of stores and the sale of non-operational properties.

Morgan Stanley and Healey & Baker advised Marks & Spencer.

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