Property leasebacks to the rescue as companies seek cash

Some believe a sale of sweet company Allen’s by Nestle is logical, particularly to Quadrant Private Equity’s local confectionery business Darrell Lea.

Owens Illinois’ has one thing in common with other global corporations right now and that is its eagerness to hive off local operations to secure cash to help address challenges closer to home.

The group finally announced its long anticipated deal on Thursday to sell its Australian and New Zealand arm to Visy, while Charter Hall will buys its manufacturing sites for $214m.

In total, the North American glass manufacturer will reap $947m in the Goldman Sachs-advised transaction as it attempts to reduce its $US5.5bn ($7.9bn) debt pile.

The Owens Illinois situation is like that involving Arnotts’ in that not only the Australia and New Zealand manufacturing operations were sold by parent company Campbell Soup Company, but also the real estate under them.

In the case of Arnotts, however, the deal came after the business was purchased by KKR.

But with other corporates exploring the same plan, the spending spree for local real estate buyers like Charter Hall is set to continue.

It is believed that Charter Hall and possibly Dexus Property Group have their eye now on other opportunities where global corporations are planning to sell properties and lease them back.

Names that come up in the discussion include pharmacy wholesaler Sigma, which some suspect will sell off property assets to a buyer - some believe it could be Dexus - and lease them back.

Struggling broadcaster Seven West Media, which is backed by billionaire Kerry Stokes has already sold the real estate operations of its West Australian newspaper business in May for $75m to Primewest to address COVID-19 challenges.

David Jones is offloading two of its key central city department store sites in Sydney and Melbourne to do just that, while Qube is still to offload its Moorebank logistics facility, with investment bank UBS advising on both transactions as well as a real estate divestment by Ampol (formerly Caltex).

Boral may sell its large Australian land holdings and Ampol is close to selling its petrol station sites to Charter Hall, as recently tipped by DataRoom, after talks extending back from two years ago, as this column first revealed.

Already, Charter Hall has recently bought properties from BP, Qube Holdings, supermarket chain Aldi and Telstra and will buy more.

Charter Hall’s strategy has been to follow private equity when it comes to their deals then negotiate to buy the properties of the assets and lock in long term leases with the firms, which are not highly enthusiastic about carrying the real estate on their balance sheets.

It has long been part of the playbook for private equity funds, with Pacific Equity Partners striking a $400m deal to sell the real estate of the Allied Pinnacle business it purchased and TPG Capital doing the same with the real estate portfolio of poultry producer Inghams.

Next Charter Hall is expected to go head to head with other groups like Kohlberg Kravis Roberts for Qube’s Moorebank logistics facility.

COVID-19 has meant that the details around how a sale of the Moorebank operation will be structured remains fluid, with some wondering whether it will sell only the infrastructure operations, the property operations or both.

When it comes to global groups divesting divisions, deal makers are watching companies like alcoholic beverages group Pernot Ricard, which had earlier assessed a move, Knauf which is offloading Australian plasterboard factories, and Lafarge Holcim, which has previously been said to be considering an exit out of the Australian market.

Other possibilities could be Kraft Heinz, which is believed to have considered a retreat from Australia in the past year, while some believe a sale of sweet company Allen’s by Nestle is logical, particularly to Quadrant Private Equity’s local confectionery business Darrell Lea.

The Australian’s DataRoom revealed the sale of the Owens Illinois assets last October.

It reported last month that the North American group was to resume a sale and revealed that Visy was an interested buyer last year.