Coles Group Ponders $100 Million in Sale Leaseback Deal in Australia

Sydney Morning Herald - April 14, 2007

Any new owner of Coles Group could make a very quick $100 million-plus through the sale of properties the retailer has on in its books.

And given the scarcity of supply of retail properties across the country, all the major property trusts such as Westfield, Stockland, GPT, Mirvac and CFS Retail, and possibly some smaller players, would snap up the sites without hesitation.

Big private equity players, which along with Wesfarmers are showing interest in the Coles auction, are quick to review the status of idle assets, such as land and buildings, and put them on the market. It is the cheapest and quickest way to raise cash.

A review of Coles's portfolio shows it has in excess of $100 million of property sitting on its balance sheet, predominantly in NSW. The group also has shopping centres in Western Australia and Victoria.

But it has made no secret of its hopes to follow other businesses in selling the property and leasing it back, then using the cash to expand its core retail operations.

Already the landlords are in the market vying for Myer's landmark Melbourne CBD complex in a sale expected to be worth up to $450 million.

Westfield is said to be firming up as the favourite, although GPT is also very keen given its ownership of the nearby Melbourne Central shopping centre between Elizabeth and La Trobe streets in Melbourne.

Myer, which will lease back the property, said at its results presentation recently that it was willing to pay $18.25 million in annual rent. Myer's chairman, Bill Wavish, said the new owner should be known mid-year.

Myer is also selling some of its last remaining property assets: stores at Dubbo, Wagga Wagga and Bendigo and will also lease back the three stores. The portfolio is expected to fetch up to $55 million. Sphere: Related Content