This article is from the Australian Property Journal archive
CALTEX plans to spin off a portfolio of 250 petrol stations into a new listed property trust, following a review of its convenience retail business in the wake of soft annual results.
Seeking to unlock capital from its assets, the fuel giant has already put 25 service station and convenience store properties to the market as part of 50 freehold sites across the country it believed offered more value through residential development.
The fuel giant flagged its intentions to begin selling off the assets as it booked a $54 million hit to its interim profit, and publicly stepped back from its earnings promise of $120 million and $150 million by 2024, given difficult economic conditions.
Caltex said the 250 sites to be part of the proposed property IPO represent all the freehold sites within the identified core network of 500 sites.
Investors have recently been offered a glut of convenience stores. Bill Withers recently sold a portfolio of 15 7-Eleven sites for about $78 million at a Burgess Rawson auction event, in addition to the 50 Caltex freeholds.
Caltex would retain a 51% majority interest in the property trust and enter into long-term leaseback agreements over each property.
Managing director and chief executive officer of Caltex Australia, Julian Segal said it is anticipated that the property trust will receive rental payments from Caltex of approximately $80 million to $100 million in the first year.
“Caltex is focussed on unlocking value in our portfolio for shareholders and the segmentation of our network following our convenience retail network review has allowed us to consider a range of options to release capital from our high-quality property assets.
“This includes realising the value of Caltex’s core convenience retail freehold sites as well as the 50 higher value alternative use sites.”
He said the group had received strong interest in the first tranche of 25 sites.
Caltex chief financial officer, Matt Halliday, said the network review provided a segmented view of the retail business, and the offering now provides an opportunity to “optimise the financial structure underpinning our retail operations at a time of attractive valuations for quality freehold property assets that are well in excess of Caltex’s trading multiple”.
To keep pace with retail and convenience trends, Caltex has converted 63 of its stations to Foodary sites that also sell fresh foods.
Caltex has appointed UBS and Grant Samuel as financial advisers, UBS as lead manager in relation to the IPO, and Herbert Smith Freehills as legal adviser.
S&P Global Ratings said that its ratings and outlook on Caltex Australia, currently BBB+/Negative/A-2, were unaffected by the decision.
“We view the divestment of a minority interest as principally a financing strategy for the broader group,” it said in a note.
“In our opinion, the sell-down of freehold sites to minority interests would create a permanent and escalating financial obligation akin to a sale and leaseback transaction. We would, therefore, likely proportionately capitalize Caltex’s lease obligations in our debt adjustments, recognizing the cash outflows relating to the 49% interest divestment.”
