Morrisons Secures £331 Million Property Deal to Bolster Financial Position

Morrisons, the UK’s fifth-largest supermarket chain, has agreed to a major property deal aimed at raising £331 million. This move is part of the company’s ongoing strategy to reduce its substantial debt burden. The deal involves the sale of ground rents on 76 of its stores, providing a significant boost to the supermarket’s efforts to improve its financial standing.

The agreement, structured as a ground rent financing arrangement, is expected to be completed by October 2, 2024. Under the terms of the deal, Morrisons will sell the ground rents of 76 of its properties to Song Capital, a well-known real estate investor. Despite this sale, Morrisons will retain ownership of the freeholds of the stores involved, ensuring it maintains long-term control over these key assets. Song Capital, meanwhile, will receive an income stream from the 76 properties over a period of 45 years, with the arrangement set to last until 2069.

This transaction is seen as a crucial step in Morrisons’ efforts to reduce its debt, which currently stands at approximately £4 billion. At its peak, the company’s debt reached £6.2 billion, but through strategic initiatives, including this property deal, Morrisons is steadily working to bring down its liabilities. If the full £331 million raised from this deal is applied to debt reduction, Morrisons’ net liabilities could decrease to around £3.6 billion, providing significant relief to its balance sheet.

Morrisons has been actively addressing its financial challenges since its acquisition by US private equity firm Clayton, Dubilier & Rice (CD&R) in 2022 for £7 billion. The company has pursued several initiatives to reduce debt, including the £2.5 billion sale of its petrol station business to Motor Fuel Group. Under the leadership of new CEO Rami Baitieh, Morrisons is also executing a revitalisation strategy that includes cost-cutting measures and efforts to enhance customer satisfaction.

Despite its financial difficulties, Morrisons continues to hold a stable position in the UK grocery market. Recent data indicates that the company maintains an 8.5% market share, which represents only a minor 0.1 percentage point decrease compared to the previous year. With approximately 500 stores and several convenience outlets operating across the UK, Morrisons remains a major player in the retail sector.

This property deal represents a key milestone in Morrisons’ broader strategy to strengthen its financial position, reduce debt, and remain competitive in a challenging retail environment.