Di Pilla searches for prospective Masters site tenants

Masters

Former UBS investment banker David Di Pilla, who spearheaded a private consortium’s acquisition of the Masters stores from Woolworths, will start meeting prospective tenants today in an effort to fully lease its new portfolio of 61 stores and 21 development sites.

Analysts are betting the business will head towards a listing on the Australian Securities Exchange once leased, following the stellar performance of petrol station real estate owner Viva Energy.

Many believe it will be a big ask for the new owners to find tenants for all of the sites, with most likely to take three or four.

One prospective tenant told DataRoom says the rents being asked by the buyer, known as Home Consortium Investment, were double the rates they were paying on some of their retail properties.

However, some questioned how there could be such a large disparity.

Still, it is believed that the consortium far outbid others in the contest, including Charter Hall and Blackstone, which were both offering a price that valued the portfolio at about $500m, according to sources.

It is estimated that the Home Consortium paid about $750m collectively for the assets.

Among the parties that are likely be approached to take space are Harvey Norman and Automotive Holdings, which was said to be taking some sites if Charter Hall had secured the portfolio.

However, most are likely to secure only three or four new sites.

Among the members of the new consortium are Australian UBS investment banking head Matthew Grounds, members of the wealthy Salteri family, along with Chemist Warehouse and Spotless. Yesterday, DataRoom reported that the new consortium has supposedly assembled lease agreements for close to 80 per cent of the portfolio, with new tenants to include JB Hi-Fi and The Good Guys.

They will take possession in April at the earliest.

Other tenants would include Anaconda, Super Amart, BBQ Galore, Boating Camping Fishing, Super Cheap Autos and Woolworths’ Dan Murphy’s liquor stores.

However, Woolworths’ hardware rival Bunnings will take the majority of the sites, with the liquidation of the Masters operation expected to offer the Wesfarmers-owned operation a further competitive edge.

Sources yesterday suggested that the new owners would likely foot the bill for the costly fit-outs required at each site for the properties’ new occupants.

Questions remain about the contractual arrangements with Woolworths on the development sites.

Meanwhile, many believe a float of the new entity — likely to be through UBS — could be imminent, as low interest rates cause equity investors to chase high-yielding sharemarket investments.

It comes after Viva Energy has seen its shares soar from its $2.20 offer price to $2.55 since listing on August 3.