ASDA - comment

The store sale and leaseback (S&L) announced today is at a yield of 6.8%. Cap Rates for supermarkets are rising, but with 10-year UK Gilts at around 4.5%, a cap rate of 6.8% offers 230bp of pick-up. S&L will remain an important source of finance for ASDA (and Morrisons) in the near term, particularly with ASDAs SSNs trading near 10%. The cap rate for Morrison's most recent S&L deal was a broadly similar 7.1%.