Woolworths’ real estate reorganisation to create opportunities for properties expansion

Posted by AFN Staff Writers on 2nd October 2012

Woolworths Ltd is moving ahead with its plans to spin-off about 70 of its retail properties by establishing new vehicles to hold and control the new property portfolio, according to a report from the Fairfax newspaper The Australian Financial Review.

According to the Australian Financial Review, Woolworths  is shortly expected to announce details of both an in-specie distribution of the fund to Woolworths Ltd shareholders as well as a $400 million or more capital raising for the vehicle.

In an earlier public media release, on 14 September 2012, Woolworths Ltd had indicated that it was reviewing its real estate holdings.

The new initiative appears to be part of an effort by Woolworths to rebalance its property book. Traditionally, the retailer has developed between 10 and 20 per cent of its own supermarket-based stock, but more recently that proportion has been in the 30 to 50 per cent range, Woolworths director of property Ralph Kemmler had said earlier this year, according to the AFR.

A property spin-off into an independent vehicle will create more flexibility to enable Woolworths to acquire more shopping centres in the future.

Australian Food News recently reported contrasting growth strategies reflected in the results of the 2 major Australian supermarkets groups reported during August 2012 in an analysis provided by Steve Spencer of FreshLogic in his firm’s newsletter Fresh InCite. This latest news from Woolworths is consistent with the particular type of growth strategy of Woolworths outlined by that article.