This article is from the Australian Property Journal archive
WOOLWORTHS is spinning its $1.406 billion real estate portfolio into a new listed REIT, Shopping Centres Australasia Property Group.
Woolworths will transfer its current ownership of 69 shopping centres in Australia and New Zealand to SCA Group. All but one of the properties have been developed or redeveloped and Woolworths is the anchor tenant for each property.
Woolworths will not acquire stapled units under the offer and will have no ownership interest in SCA Property Group.
SCA Property Group will be an independent entity with its own board and management team.
Woolworths’ CEO Grant O’Brien said historically, the company enters into long term leases over its premises rather than holding property assets.
“During the Global Financial Crisis, Woolworths increased its involvement in the development of retail centres using its own balance sheet. Woolworths has decided to transfer certain property assets into a more appropriate vehicle allowing for better alignment with the core retailing business.
“Woolworths has determined that creating SCA Property Group is the best option to reduce the quantum of property held on the Woolworths balance sheet, make better use of Woolworths’ capital, and release value to shareholders. We are focused on growing earnings from our core retail business. Reducing the capital invested in property will allow Woolworths to focus on other growth options,” he added.
Woolworths shareholders will receive one stapled unit in SCA Property Group for every five Woolworths Shares.
SCA Property Group is undertaking a public offer of 337.3 million stapled units to raise between $425 million and $506 million which will be used to partially fund the acquisition of the portfolio.
In the interim, Philip Clark AM will be Chairman of SCA Property Group. Anthony Mellowes, currently head of asset management and group property operations at Woolworths, will become CEO.
Standard & Poor’s Ratings Services said Woolworth’s ratings and outlook remains unchanged.
“The transaction will result in Woolworths incurring additional operating lease payments (which we treat as debt) for occupying the properties sold to the REIT. However, we anticipate the transaction will have a minimal impact on Woolworths’ financial metrics as the cash proceeds from the sale will be used to repay Woolworths’ on-balance-sheet debt.
“Nonetheless, we expect Woolworths’ financial risk profile to remain at the weaker end of our expectations for the rating in year ending June 30, 2013. Accordingly, the ratings and outlook anticipate that Woolworths will actively manage its capital base to maintain a financial profile in line with the ‘A-‘ rating. In this regard, we expect that the company will manage its fully adjusted funds from operations (FFO) to debt at about 25% or more and fixed-charge coverage at the upper end of the 2.5x-3x range,” S&P said.
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