Supermarket selling spree could spark big demand
THE sale of 19 New Zealand supermarkets by their wealthy British owners could be the start of many retail property investors putting their premises on the market.
Five Wellington Countdowns are part of a $200 million portfolio owned by Antipodean Supermarkets, an entity ultimately owned by British property giant William Pears Group and individual investor Jonny Berman.
The deal comes with lengthy leases to Progressive Enterprises, the owner of Countdown and Fresh Choice supermarkets.
But for passive investors, the guaranteed income is more than welcome.
John Polkinghorne, a retail and property analyst for RCG, said sell and leaseback arrangements were not new, but the high degree of investor interest in quality commercial property at present might see quite a few more such arrangements.
‘‘There’s a lot of demand for those assets at the moment,’’ he said.
‘‘You’re now getting improved sentiment, and a lot of lease assets are going to start changing hands again.’’
Polkinghorne said the Antipodean sale could be the first of several supermarket sales, as Progressive was also likely to look at selling some of its sites.
Countdown tended to lease, he said, in comparison to its rival Foodstuffs, which tended to own and hold.
‘‘Their core business isn’t holding property, it’s running supermarkets, so essentially, when it’s a time like now and the investment market’s running really hot . . . it’s a win-win.
‘‘They can get those lowgenerating assets off their books, and they give themselves a long lease which gives them long-term security.’’
Other retail landlords looking at the sale and leaseback concept include a family trust that owns Tauranga’s Farmers store, with rights of renewal for Farmers until 2020.
Bunnings and Farmlands have also been advertising for ‘‘property only’’ buyers for some of their sites recently.
The Antipodean portfolio was bought in two tranches by its current owners from 2007.
In Wellington, it owns Countdown Johnsonville, Kilbirnie, Lower Hutt and Upper Hutt, and Countdown Maidstone, also in Upper Hutt.
It also owns six Countdowns in Auckland, one in Morrinsville and six in the South Island, plus a Fresh Choice in Queenstown.
Sixteen of the supermarkets come with 20-year leases and rights of renewal that will give Progressive security of tenure for up to 50 years.
Industry sources say that next to government tenancies, the supermarket portfolio is one of the least risky types of commercial properties to invest in.
They expect plenty of interest in the Antipodean portfolio, particularly from fund managers.
JLL Corporate Finance’s Stuart McCann, whose agency is involved in the sale with Colliers International, said it was an attractive deal to investors who liked New Zealand’s transparency and favourable long-term indicators.
‘‘However, accessing investments of this scale can be challenging.
‘‘That’s why an opportunity to acquire 19 supermarkets, generating around $700 million in turnover and offering a strong income growth profile, will attract significant interest.’’
A key drawcard for New Zealand was its efficient tax regime, he said, with no stamp duty, no capital gains tax on property and no land tax, all of which enhanced post-tax returns.
Retail spending was robust, house prices were still growing strongly, and the population was growing by 1.4 per cent a year.
Offers on the portfolio conclude on September 9.