The 19-supermarket Countdown portfolio bought by DNZ Property Fund Ltd this week has maintained its value in yield terms through its recent sales.
DNZ bought the whole portfolio (3 still subject to third-party consent) from the Pears Group of the UK for $287 million at a 6.5% initial yield on net rent of $18.7 million. Leases range from 9-19 years remaining, with a weighted average lease term of 18 years. All the supermarkets are leased to Countdown operator General Distributors Ltd, a subsidiary of Woolworths Ltd of Australia.
The transaction is unconditional and scheduled for completion between 28 October & 12 November, except for the 3 requiring third-party consent.
In the most recent transaction on the portfolio, when Pears Group company Antipodean Supermarkets Ltd bought the remaining 50% from joint-venture partner the Charter Hall Retail Trust in 2010, the initial yield was 6.6%.
The portfolio has a long history of trades, starting when the Macquarie CountryWide Trust bought 13 of the supermarkets from Progressive Enterprises Ltd in a sale-&-leaseback arrangement in 2000. Macquarie Countrywide (later to become Charter Hall Retail Reit) grew the portfolio to the present 19 supermarkets and sold 50% to Antipodean for $103.5 million in 2006, at 68% over its acquisition cost base. Charter Hall completed sale of the balance to Antipodean for $85.3 million in 2011.
Antipodean Supermarkets was a 75:25 joint venture between the William Pears Group of Companies Ltd and Jonny Berman, who sourced the portfolio for the family-owned Pears group, but a second company owning part of the portfolio, Antipodean Properties Ltd, was wholly owned by Pears’ Orbit Estates Ltd.
DNZ spoke recently of growing its real estate investment management business, and chairman Tim Storey said this week the company saw this portfolio as an opportunity to establish a new, specialist investment product with a higher-than-average leverage & income yield.
Chief executive Peter Alexander said the portfolio complemented DNZ’s existing $168 million portfolio of bulk retail assets, which included supermarkets, hardware outlets & a discount department store.
DNZ completed a $115 million of 59.4 million new shares yesterday, fully subscribed at $1.94/share. Settlement & allotment is expected on Wednesday 7 October. Further funding will come from a $15 million share purchase plan at up to $15,000/shareholder. Details will be sent out on Friday 9 October, with an expected close of Wednesday 28 October.
DNZ will use bank debt from existing lenders to fund the $161.4 million remaining required to complete the acquisition.
The company said it expected the acquisition to be accretive to distributable profit/share, by between 1.3-1.8% in the first 3 full financial years.
1 September 2014: Charter Hall reit completes NZ selldown
18 April 2011: Charter Hall completes sale of all but 2 of its NZ supermarkets
20 April 2007: Macquarie CountryWide uses NZ sale proceeds to enter Europe
10 December 2006: Macquarie CountryWide sells 50% interest in Progressive supermarket properties
Attribution: Company releases, Pears websites, Overseas Investment Office.