Woolworths confirms plans to sell up to $1 billion worth of shopping centres

Woolworths has confirmed that it plans to sell close to $1 billion worth of shopping centres held in its property portfolio.

Woolworths finance director Tom Pockett told investors today that “probably somewhere between $800 million or $900 million plus” worth of property was available for sale, with the total value depending on whether centres were completed or under development.

The supermarket group owns a portfolio of neighbourhood and sub-regional shopping centres.

As part of its annual results presentation last week, Woolworths told shareholders it had “passed the peak in its property development pipeline” as the supermarket reported a 14.5% drop in net profit after tax to $1.8 billion.

Sale of the stores was mooted by the Australian Financial Review earlier this year, which said Woolworths was looking to return to its core retailing activities.

In September last year Woolworths took the unusual step of buying the Centro Lismore, NSW, shopping centre, where it is the anchor tenant on a short-term lease.

But corporate affairs spokesman Simon Berger told Property Observer at the time that the main focus for Woolworths remained being a retailer and “looking for opportunities to serve our customers”.

“We will develop or acquire where it suits our interests and customers, but we also lease in plenty of places,” he said.

In July last year, Woolworths completed the sale of eight neighbourhood and sub-regional retail shopping centres to a 50/50 joint venture entity owned by Charter Hall Retail REIT and Telstra Super for $266 million at an initial yield of 7.94%.

Pockett told investors Woolworth was always offering properties to investors but this is the first time the supermarket has confirmed plans for a large-scale divestment.

Pockett highlighted that sales activity would be driven by buyer interest in the group’s centres and Woolworths would not be giving its centres away.

He described current investor appetite as “a bit lower than last year” amid a “tough” investor environment.

Woolworths is targeting yields of 6% to 7%, a range it has struggled to achieve, reported RBS analysts Daniel Broeren and Alexander Beer.

Commonwealth Bank analysts estimate that Woolworths actually holds closer to $2 billion worth of property assets that could be sold.

It estimates that at the current rate of new development, Woolworths’ property portfolio could accumulate to a value of around $8.5 billion by 2017.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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