Woolworths Closes $846 Million Sale Leaseback of 11 Distribution Centers In Australia

The Australian - June 15, 2006:

In Australia's biggest industrial property sale, unlisted funds managed by SAITeysMcMahon and Lend Lease have paid a combined $846 million to buy Woolworths's prime portfolio of 11 distribution centres around the country. The new, purpose-built centres will be leased back to Woolworths for 15 to 17 years.

Under Woolworths's sale terms a price was fixed for the assets and parties were asked to "rent bid" the 630,000sqm portfolio, effectively by offering the lowest rent.

In a sale handled by merchant bank Grant Samuel, SAITeysMcMahon and the Lend Lease-managed Australia Prime Property Fund are believed to have offered rents equating to a 6.3 percent income yield overall, beating shortlisted parties the ALE Property Group and Westpac Office Trust. Woolworths would not specify the overall yield yesterday, saying it was "sub 6.5 percent", implying annual rent on the centres of less than $55 million.

SAITeysMcMahon acquired the biggest chunk in what chief executive David Hinde admitted was a "huge step up" for the fund manager, which largely distributes its product to retail investors through financial planners. SAITeysMcMahon bought eight of the centres, with a combined 430,000sqm of space, for a total of $623 million.

The properties will be maintained and repaired by Woolworths under the lease terms, although a joint venture between SAITeysMcMahon and the Lend Lease-managed Australia Prime Property Fund would be responsible for structural and capital expenditure works. Outgoing chief executive Roger Corbett said the deal gave Woolworths flexibility to alter and adapt the centres to meet changing operation requirements over time and was a "good outcome for all parties".

APPF acquired the three remaining centres, totalling about 200,000sqm, for $223 million, again without specifying which centres or other purchase details, lifting the value of its industrial portfolio to $491 million.

Woolworths is close to finalising a consolidation of its distribution centre network from 30 to 11, part of the Project Refresh cost-reduction program which has cut overheads by $3.6 billion over the past six years. Sphere: Related Content