SUPERMARKET group Tesco has announced a major step in its expansion drive with a deal to realise £650m from its UK property portfolio.

The group will free up capital by establishing a joint venture with privately-owned property group Topland that will affect 33 stores and two depots.

The move is part of a fundraising drive to boost the group's "firepower and flexibility".

Tesco has already raised £773m through a share placing as it goes in search of more of the non-food market, particularly through the provision of extra space for sales of clothing and health and beauty products.

Under the terms of the deal, Tesco will continue to operate the stores - equivalent to five per cent of its property estate - and decide on their layout. Tesco will also pay pre-agreed rents.

Tesco finance director Andrew Higginson said the tie-up allowed Tesco to "run stores in the best way for customers and in the most cost effective way for the business".

The sale-and-leaseback deal involves stores spread around the country, while the two distribution centres are at Daventry, Northamptonshire, and Milton Keynes, Buckinghamshire.

Tesco has four smaller property joint ventures, including with developers British Land and Slough Estates.

Property investor Topland, of London, agreed a similar contract with Marks & Spencer for 78 stores in October 2001.