WOOLWORTHS has taken the unusual step of forming a joint venture with a property developer to build a shopping centre and specialist shops in Western Australia, as it moves to safeguard its expansion plans in the face of the banks' tighter lending for property deals.
Woolworths will take an 80 per cent stake in the planned shopping centre in Geraldton, after forming a joint venture with local businessman Barry Humfrey and his company, Humfrey Land Developments & Real Estate.
The partners will build a shopping centre that will include a 3200-square-metre supermarket and 1800 square metres of speciality shops and community facilities.
Mr Humfrey has been involved in the development of a range of commercial properties in Geraldton and Exmouth, including tourist resorts.
Woolworths and Mr Humfrey have created a company called Fabsky to build the shopping centre, BusinessDay has learnt, with Woolworths finance director Tom Pockett and company secretary and general counsel Peter Horton named in ASIC documents as directors. Mr Humfrey is named as the third director.
Woolworths' stake in the partnership is held through Fabcot, the retailer's development arm. The joint venture was formalised last month.
Woolworths has used several methods to protect and accelerate its new-store developments, buying up parcels of land in its own right on which to develop supermarkets or forming deals with property developers.
The joint-venture model, as forged with Mr Humfrey, is more unusual.
Woolworths has also used its massive cash flows to save distressed property developments from bank foreclosure, although there is no suggestion the site in Geraldton was facing financial problems.
Following the global financial crisis, it was feared that skittish banks and other lenders would refuse to lend large sums of money to property developers or would demand much greater equity from developers before credit was provided.
This could have capped the expansion plans of Woolworths, as well as those of rivals such as Coles.
Many development deals have fallen over since the financial crisis, with developers reporting much stricter lending conditions from the banks.
Woolworths has been engaged in an aggressive supermarket development program, as well as a plan to build more than 150 big-box hardware stores over the next five years.
Frequently Asked Questions about this Article…
What exactly did Woolworths do in Geraldton — did it form a joint venture?
Yes. Woolworths formed a joint venture with local developer Barry Humfrey and his company Humfrey Land Developments & Real Estate to build a shopping centre in Geraldton. The JV was formalised last month and the new company created to build the centre is called Fabsky.
How big is Woolworths’ stake in the Geraldton shopping centre joint venture?
Woolworths will take an 80% stake in the planned Geraldton shopping centre. Its interest in the partnership is held through Fabcot, Woolworths’ development arm.
What will be built at the Geraldton site — how large will the supermarket and shops be?
The planned shopping centre will include a 3,200-square-metre supermarket and about 1,800 square metres of specialty shops plus community facilities, according to the article.
Who are the named directors of the joint-venture company Fabsky?
ASIC documents name Woolworths’ finance director Tom Pockett and company secretary/general counsel Peter Horton as directors, with Barry Humfrey named as the third director of Fabsky.
Why is Woolworths using a joint-venture model with a local developer instead of its usual approach?
The article says the JV is an unusual step taken as Woolworths moves to safeguard expansion plans amid banks’ tighter lending for property deals. While Woolworths often buys land outright or makes deals with developers, this joint-venture structure helps protect and accelerate new-store development when credit is harder to obtain.
How does this move relate to Woolworths’ broader expansion and development strategy?
Woolworths has been running an aggressive supermarket development program and is also planning to build more than 150 big‑box hardware stores over the next five years. The Geraldton JV is part of efforts to keep that expansion on track despite tougher lending conditions.
Does the article say whether the Geraldton site was in financial trouble before Woolworths got involved?
No. The article notes Woolworths has used its cash flows in the past to save distressed developments from foreclosure, but it specifically says there is no suggestion the Geraldton site was facing financial problems.
What does this joint venture mean for everyday investors following Woolworths and its competitors like Coles?
According to the article, the JV is a way for Woolworths to protect and accelerate new-store rollouts when banks demand stricter lending terms. That same tightening of credit could have capped expansion plans for Woolworths and rivals such as Coles, so the JV signals Woolworths is actively finding ways to keep growing its footprint despite tougher financing conditions.
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