Next seeks sale and leaseback on warehouses for £100m boost

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Clothes and homeware retailer Next is seeking sale and leasebacks on warehouses and its Leicestershire headquarters that it holds freehold, in an effort to secure £100 million to boost its coffers through the coronavirus crises.

Last month Next closed its warehousing and distribution operations and said it would not be taking any further orders via its e-commerce channels.

Next chief executive Lord Wolfson had already prepared shareholders of such an eventuality in the company’s annual report published last month.

The company ran a stress test looking at three business outcome scenarios that it felt the coronavirus poses to the business and published the actions it expected to take ‘to weather the storm’.

Lord Wolfson said: “When the pandemic first appeared in China, we assumed that the threat was to our supply chain.  It is now very clear that the risk to demand is by far the greatest challenge we face and we need to prepare for a significant downturn in sales for the duration of the pandemic.

“We have no experience of a similar crisis so there is no way of predicting the extent that the effect coronavirus will have on our retail and online sales. It is not yet clear how widespread the virus will be at any one time, how long the pandemic will last and what the medium to long term effect of this pandemic will be on consumer behaviour.

“Our priority is to do all we can to keep our workplaces and shops as safe as possible for customers and staff.  At the same time we must prepare the business for varying levels of sales declines.  To that end we have modelled the effects of differing levels of sales declines along with all the measures we can take to ensure that the company remains within its bond and bank facilities.”

The company believes that the sale and leaseback of the warehouse and headquarters could realise £100 million.

In 2014, Tritax paid £60 million for a Next DC in Doncaster. There were only nine years left on the lease at the time. In 2013, Legal & General paid £86.6 million for the 1.85 million sq ft clothes DC at Brookfields Park in Rotherham.

Next is currently developing a new online boxed warehouse, which it expects to be operational in 2022.

LM understands that ACRE Capital Real Estate is handling the sale and leaseback of the Next warehouses while Savills is advising on the sale of Leicestershire HQ.

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