Woolworths considering spinning off property holdings into A-REIT

Woolworths is continuing with its preparations to offload up to 70 shopping centres its own worth around $1.5 billion.

The group is believed to be favouring setting up an independent listed property fund (A-REIT) that would hold the assets, according to a report in the Australian Financial Review.

Woolworths is being advised by Citi with plans to raise more than $400 million for the fund, which would also allow Woolworths to make strategic property acquisitions into the fund in the future.

The proposal has the backing of analysts and fund managers.

Commonwealth Bank analyst Andrew McLennan said that the “rising amount of property on Woolworths’ balance sheet was constraining cashflows that could otherwise go to capital management”.

McLennan added that he expected Woolworths to come up with structures that ensure the spin-off went smoothly.

Brett McNeill, investment manager at Antares Equities, said if the fund had good governance practices and was structured well, there was no reason why it couldn’t trade well.

According to the AFR, there is excitement among some fund managers about the idea of a Woolworths property fund, which would be seen as one of the “first high-quality offers for some years after some smaller industrial and office plays”.

Woolworths has already sold off some of its shopping centres in recent times.

In July last year, eight neighbourhood and sub-regional retail shopping centres were sold to  a 50/50 joint venture entity owned by Charter Hall Retail REIT and Telstra Super for $266 million.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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