A joint venture between William Pears Group, one of the UK’s biggest property companies, and Jonny Berman, is putting a portfolio of 19 supermarkets across New Zealand valued at over $200 million up for sale through global real estate firm Jones Lang LaSalle.
The portfolio of properties is owned by Antipodean Supermarkets, a local subsidiary of London-based Orbit Estates, which is linked to British property behemoth William Pears Group.
Antipodean is effectively the biggest private owner of supermarket sites in NZ outside the supermarkets themselves.
The nationwide group of assets is currently leased to Progressive Enterprises, which operates 18 of the stores under the well-known Countdown brand and one as a FreshChoice supermarket.
Progressive Enterprises is one of NZ’s largest companies and is a fully owned subsidiary of Woolworths Limited, Australia’s largest supermarket operator. Woolworths, which has had an A- Standard & Poor’s credit rating since 2001, has a market capitalisation of US$26 billion and a turnover in excess of US$45 billion.
The majority of the assets for sale are subject to new 20-year leases and rights of renewal that give Progressive Enterprises security of tenure for up to 50 years. This long-term tenure underpins the portfolio weighted average lease term of over eighteen years (based on initial lease terms, not including rights of renewal). All leases commenced in March 2015.
Head of JLL’s capital markets business in Asia Pacific, Stuart Crow, is managing the sale together with JLL corporate finance colleagues, Chris Key and Stuart McCann.
McCann says, “International investors are attracted to NZ’s transparent real estate markets 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 NZ$700 million in turnover and offering a strong income growth profile, will attract significant interest.”
A key draw of the NZ market is its efficient tax regime that encourages business investment. Currently there is no stamp duty, no capital gains tax on property and no land tax. This compares favourably to other jurisdictions regionally and works to enhance post-tax returns.
In addition, NZ’s retail spending economic indicators are robust. GDP grew by 3.5 per cent during 2014, the population is growing at 1.4 per cent per year, and house prices grew over the past year by eight per cent nationwide. These factors are flowing through to consumption spending, with retail sales growing by 5.3 per cent during the year to March 2015 (source: Monetary Policy Statement, June 2015).
“Right now, the NZ real estate sector is attracting record levels of offshore investor interest. Of the NZ$5.2 billion of real estate transacted across the country last year, NZ$2.9 billion was invested by international capital,” points out Crow.
Key notes the major contributors to this significant level of offshore investment were DEKA, GIC and PSP, which combined contributed over NZ$2.4 billion. “These major commitments have focused significant international attention on NZ as a core proposition that also provides strong risk-adjusted returns.”
The portfolio is being offered to investors in one-line or individually via an international private treaty process, which concludes on September 9.
Real estate experts concur that it is a “very significant portfolio” and likely to appeal to large institutions, overseas funds and syndicates.
If the deal goes offshore, Overseas Investment Office approval will be required.
William Pears and Berman originally bought a half stake in 17 supermarkets from joint venture partner, Charter Hall Retail Trust, for $103.5 million in 2007. It acquired the other half in 2010 for $100 million.
Berman resigned as a director of Antipodean in 2011 and was replaced by Guy Walker, a former William Pears treasurer based in Wellington.
Companies Office records suggest that Antipodean is heavily in debt. Its accounts for the year to April 2014 reported a revenue of $15.3 million, mostly in rental income, on which it made a $2.11 million net profit accompanied by a retained deficit of $26.7 million.
The value of its property and plant last year was $163.5 million, but its total liabilities were more than $190 million.
Colliers International in NZ is acting as a joint agent and is responsible for managing enquiries from investors with head offices domiciled in Australia and NZ. JLL will handle all other international enquiries.
