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UK supermarket chain Morrisons is exploring options to raise up to GBP 1 billion through a property-backed financing transaction, secured against a portion of its freehold store portfolio, according to a media report. The process, which is at an early stage, is being advised by real estate consultancy CBRE and is not expected to involve a traditional sale-and-leaseback structure. The move comes as Morrisons looks to strengthen its balance sheet following a period of flat annual earnings, driven by rising operating costs. Owned by US private equity firm Clayton, Dubilier & Rice since 2021, the grocer has been undergoing a strategic overhaul aimed at improving competitiveness against larger UK peers and discount retailers. The potential financing highlights the continued role of grocery real estate as a stable collateral asset amid operational headwinds.
British supermarket group Morrisons is evaluating a property-backed financing transaction that could raise up to GBP 1 billion, secured against part of its extensive freehold store portfolio, according to a report by Sky News. The UK's fifth-largest grocery retailer has reportedly appointed real estate advisory firm CBRE to assess funding structures and investor appetite for the proposed deal. Advertisement
Sources cited in the report indicated that the process remains at an early stage and is unlikely to take the form of a conventional sale-and-leaseback transaction, which has historically been used by UK retailers to unlock real estate value. Instead, Morrisons is understood to be considering medium- to long-term borrowing arrangements secured against a selection of supermarket assets, allowing the company to retain operational control while leveraging its property holdings.
The potential financing initiative comes against the backdrop of sustained cost pressures in the UK grocery sector. Morrisons recently reported flat annual earnings, reflecting higher input costs and a competitive retail environment. Since being acquired by US private equity firm Clayton, Dubilier & Rice in 2021, the retailer has been focused on stabilising performance and improving operational efficiency.
Under Chief Executive Rami Baitih, Morrisons has been pursuing a modernisation strategy aimed at narrowing the performance gap with larger rivals such as Tesco and Sainsbury's, as well as discount operators Aldi and Lidl. Unlike many of its competitors, Morrisons operates an integrated business model, producing a significant proportion of the fresh food it sells, a structure that offers supply-chain advantages but also exposes the business to higher fixed costs.
From a real estate perspective, Morrisons remains one of the UK grocers with the largest proportion of freehold-owned stores, a factor that continues to attract interest from lenders and property investors. Property-backed financing structures have gained traction among retailers seeking liquidity without materially altering store operations or ownership.
Morrisons and CBRE did not comment on the report. Market observers note that any transaction would depend on asset selection, valuation assumptions, and broader credit market conditions, particularly as interest rate expectations evolve in the UK.
Source - Reuters
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