The supermarket property game is like Monopoly. It promises players the thrill of getting rich quick. Over the past decade, UK supermarkets have amassed a vast collective property portfolio. Valued at more than £100bn by experts, it includes most of the best high street and out-of-town sites in the land. And it's game on to release some of the value from this largely untapped goldmine.

Prompted in part by shareholder pressure to sweat hidden assets and return more cash, directors at the top multiples have been reassessing their freehold portfolios. Few of the tricks are new. Sainsbury's and Tesco were early movers in sale-and-leaseback of various ilks, the rationale being that by selling freeholds and taking 10, 15 or 25-year leases, you can maximise value for shareholders, fund expansion and boost your pension fund (depending on your priorities at that time).

But the latest round of make-hay-while-the-sun-shines tactics, which include complex halfway-house deals as well as opco-propco restructurings, could mask a real change in the way the supermarkets handle their properties.

There has been an unprecedented level of activity recently. Last week Sainsbury's signalled it would raise more funds from its estimated £8bn to £9bn property portfolio, by refinancing its property either through securitisation or joint ventures, as it fights off a challenge from Robert Tchenguiz, who is still hoping to split the company into an opco-propco structure. This continues the game it started in 2006 when it raised £2.1bn by refinancing the freehold and leasehold of 127 stores (see box).

Meanwhile, Sir Terry Leahy wants to release up to £5bn from Tesco's property portfolio over the next five years. It sounds a lot but Tesco values its property portfolio at £17bn - almost three times the current price of its nearest rival - and this is regarded as conservative: experts say the real figure could be closer to £28bn. It signed its fourth property joint venture with British Land late last month. The £650m sale-and-leaseback of 21 supermarkets takes British Land's Tesco portfolio to almost £2bn.

There is one big downside to sale and leasebacks, namely upward-only rent reviews. Take Hulme in Greater Manchester, a once-notorious slum on the southern fringe of the city , which was extensively redeveloped in the 1990s. Out went system-built housing, in came two-bed semis and a new 72,000 sq ft Asda.

Asda's decision to take a pre-let on the store was followed promptly by the sale of the freehold for £14m. The investor - Jamie Ritblat, son of British Land's life president John Ritblat - was tempted by the £12.50 a sq ft rent paid by Asda. But Asda has since had to face a rent review and is now paying £17 a sq ft - or £324,000 more than it was.

Meanwhile, in nearby Urmston, both Tesco and Sainsbury's have been competing to rent a 50,000 sq ft store. The result has been a massive inflation in rent - by as much as 45% on some accounts - resulting in a figure of £20 a sq ft. And in Hale Barns on Greater Manchester's suburban fringe, Waitrose has signed up for a 19,720 sq ft store. Here, too, the rent is said to be £20 a sq ft.

Paul Jones, investment partner with Manchester surveyor Tushingham Moore, says rapidly inflating rents pose a dilemma. "The supermarkets will have to get used to rising rents if they move from being predominantly freeholders to substantial leaseholders," he says. "We're already seeing massive growth. Tesco Chiswick's rent has risen from £8-£10 a sq ft in the late 1990s to £30 a sq ft today. Rents are rising rapidly in Manchester too."

The dilemma for supermarkets is whether they should risk unexpectedly high rental increases or keep a lot of capital tied up in freeholds. "What they seem to be doing is choosing a middle way, which is to sell the freeholds but opt out of open-market rent reviews, which means they still keep some control of rent increases," says Jones.

Either way, more supermarkets are seeing the balance begin to shift from freehold to leasehold. Waitrose is among those grappling with the transition thanks to its aggressive expansion plans. "We prefer freehold stores," says James Gilhooley, Waitrose head of property development. "However, over recent years leasehold stores have been more readily available due to the Morrisons disposals. Going forward we will look at either option, providing the location is right for us."

Some are exploring other options. Two years ago Tesco started working on flexible, highly tailored joint ventures with a range of property-owning partners, including Topland, Consensus and Morley. The joint ventures work by placing the property into a separate entity formed for the express purpose. The new company is controlled on a 50:50 basis by a board that gives both parties equal voting rights. The beauty of this approach is that it enables Tesco (and its partners) to raise the finance on the property on the enormous strength of its assets. Tesco puts hardly any of its own money into the joint venture. Thus, in a booming commercial market, it gets a lot of leverage out of the deal, boosting return on capital.

"They enabled us to fund our growth efficiently by releasing cash from our property base, develop a stream of material property profits and also enhance our returns," said Sir Terry Leahy in January, concluding that Tesco could comfortably drop from 85% to 70% freehold.

Playing the property game is not without risk. What happened to Debenhams is case in point. It was bought by a consortium of private equity groups in 2003 for £1.9bn. Hiving off the property assets paid handsome returns to investors but left the group more exposed.

At the end of the day, it's all about the cost of funds. Retailers can use their own cash, borrow from the debt market or leverage their property. The mix changes according to prevailing circumstances - and at the moment property is seen as the best way to get rich quick. But there's a fine line between being in control of your assets and these assets becoming a liability.Different tactics

Refinancing: This entails borrowing cheaper money to pay off a more expensive loan. Sainsbury's tried it in 2006 and saved itself £12m a year in interest alone. Because the property isn't going anywhere, repayment terms are spread over 12-25 years. By then, Sainsbury's will have earned many times its cost of borrowing

Sale-and-leaseback: This is where one party sells a property to a buyer and the buyer immediately leases it back to them. It is an approach adopted by Tesco, which has the muscle to negotiate cap rental increases of 2.5%-3.5% compared with the 4%-7% standard in UK property

Opco-propco: This transfers the property assets into a property company (propco) and leaves the retail business in an operating company (opco). The upside is that you can borrow against the property; the downside is the retail business is exposed and could face higher rents to pay off debt

REITs: Real Estate Investment Trusts are the new tax-efficient vehicle for investing in property. They need good reliable returns to keep investors happyin the trolley





M&S £3.5bn