Bunnings eyes capital raising
The move – which would take advantage of share prices that are trading higher than net tangible assets – comes as a number of property fund managers confirm they have been sounded out by trusts and corporate advisers for a number of new propositions.
Macquarie’s team is working on a potential Mexican REIT, which is said to comprise about 240 industrial sites and warehouses in the North American country.
The listed data centre group NextDC is said to be looking at raising cash for centres on a sale and lease-back deal. That could be worth about $88 million.
Coles is also expected to make a decision on its property assets following the same move by Woolworths last month when its SCA Property Fund floated.
Under a deal Coles could either sell about $600 million worth of shopping centres in one line or create a new fund and retain a cornerstone stake. Charter Hall Group and a myriad of superannuation funds are the mooted buyers if a direct sale option is preferred.
BWP Management’s general manager, Grant Gernhoefer, confirmed a raising from his group would only be made for specific asset acquisitions.
Mr Gernhoefer told BusinessDay that with the trust’s price currently at a premium to NTA, ‘‘it is in the right territory for a capital raising’’.
‘‘But it would be driven by asset acquisition opportunities. We don’t want to make any dilutive raisings, but we are always on the lookout for appropriate properties to expand the portfolio.’’ Mr Gernhoefer said that BWP had a broader mandate of assets than just Bunnings stores, such as other homemaker centres.
These could include Masters stores that are owned by Woolworths and could be sold and leased back.
The move to tap the sharemarket was kicked off recently by Charter Hall Retail REIT, which raised $100 million for new acquisitions and Goodman Group’s Australian wholesale industrial trust.
The director at Evergreen Capital, Andrew Smith, said the real estate investment trust sector was in a ‘‘purple patch’’ for new trusts and capital raisings in the coming months.
‘‘I would say the stage is set for a busy start to 2013 with the low cost of debt, prices above NTA and new REIT managers keen to shift strategies,’’ Mr Smith said.
‘‘It’s a real purple patch for the listed sector.’’
The managing director of capital transactions Australia at Knight Frank, James Parry, said the past three months had seen a return to the market from institutions.
‘‘Key investors include Dexus, Investa, Mirvac and Colonial, to name a few . . .’’ Mr Parry said.
‘‘Over the past two to three months, the market has been the most active since 2007.
‘‘There is a lot of renewed buying interest with the spread of activity to continue into next year, due in large part to the [low] cost of debt.’’
Frequently Asked Questions about this Article…
Bunnings Warehouse Property Trust has been exploring a potential capital raising to take advantage of its shares trading above net tangible assets (NTA). BWP’s management has said any raising would be targeted at specific asset acquisitions to expand the portfolio rather than a general, potentially dilutive equity issue.
When a trust’s share price trades above net tangible assets (NTA), it can issue new equity at a relatively favourable valuation. The article notes managers see this as an opportunity to raise funds for acquisitions while market conditions (including low cost of debt) make new raisings more attractive for REITs and property trusts.
The article highlights several acquisition targets: industrial sites and warehouses (including a possible Mexican REIT of about 240 industrial sites being worked on by Macquarie), shopping centres (Coles could sell about $600 million of centres or create a new fund), data-centre assets (NextDC is considering a sale and lease-back worth about $88 million), and other homemaker centres and former Masters stores that BWP might acquire.
A sale and lease-back is when a company sells a property to raise cash and then leases it back to continue operating there. The article reports NextDC is considering a sale-and-lease-back to raise cash for its data centres, with the transaction potentially worth about $88 million.
Coles is expected to decide on its property strategy after Woolworths floated the SCA Property Fund. Options for Coles include selling about $600 million of shopping centres in one line or creating a new property fund and retaining a cornerstone stake. Potential buyers for a direct sale include Charter Hall Group and various superannuation funds.
The article mentions Charter Hall Retail REIT (which recently raised $100 million), Goodman Group’s Australian wholesale industrial trust, Macquarie (working on a Mexican REIT), NextDC, Coles, Bunnings Warehouse Property Trust, and institutional players returning to the market such as Dexus, Investa, Mirvac and Colonial. Industry advisers also report renewed buying interest from institutions.
Industry experts like Andrew Smith of Evergreen Capital describe it as a 'purple patch' because of several supportive factors: low cost of debt, share prices trading above NTA, and new REIT managers willing to shift strategies. These conditions have combined to create strong demand for new trust listings and capital raisings.
Investors should check why the trust is raising funds (the article stresses BWP would raise only for specific asset acquisitions), whether the raising could be dilutive to existing holders, how proceeds will be deployed (acquisitions vs refinancing), and the market context (prices relative to NTA and cost of debt). Reviewing manager commentary and proposed buyers or cornerstone investors can also provide insight into the likely impact on value.
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