Woolworths Seeking AU$900 Million Sale Leaseback of Over 30 Shopping Centers in Australia

The Australian - September 7, 2010

Woolworths is offloading a $900 million-plus portfolio of shopping centres.

After unsuccessfully sounding out potential investors in the portfolio, the retailer is seeking tenders, in its largest sale of property assets.

The last time Woolies sold a chunk of its assets was in June 2006 when it sold 11 distribution centres to a consortium led by Lend Lease for $846m.

The properties, which will be leased back by Woolies, include Ashgrove Marketplace in Queensland, Carnes Hill Marketplace in NSW and Pakington Strand in Geelong West, Victoria.

Woolworths property director Ralph Kemmler said it was not unusual for the retailer to develop and sell assets.

It had been developing shopping centres since the early 1990s, Mr Kemmler said. It stepped up development during the global crisis, when developers and listed property trusts drew back.

"We had to step in to fill the hole to keep up with our new store openings," he said.

Last year, it completed between 10 and 12 new centres, he said, and it would continue in-house development.

"This is a unique bundle of assets consisting of supermarkets, some with a cluster of shops around them, and sub-regional centres."

Mr Kemmler said local and offshore investors were interested in a sizeable portfolio, ranging from $300m to $1 billion.

There was "money available on the world market that would be interested in investing in quality assets".

Woolworths hopes to conclude a transaction in the next six months. "There is no urgency to offload this portfolio," Mr Kemmler said.

The retailer owns more than 1000 properties nationally and last year sold about $100m of centres and service stations.

Woolworths and its US joint-venture partner Lowes are planning 150 hardware stores, and have secured half of the sites. However, Mr Kemmler said, the sale was not an exercise in recycling to build the hardware stores.

"They went around to a lot of people asking for a proposal for the assets earlier this year," a leading funds management group's property head said.

"It is an awkward time for them to be offering the assets. They will be competing, for instance, with the Centro portfolio," he said.

The main issue would be the leases, which favoured the retailer. "It is hard to do a deal with Woolworths."

Another source said the Future Fund and the Canadian pension funds were unlikely to be interested. Sphere: Related Content