Wesfarmers has struck a deal to unlock hundreds of millions of dollars from property acquired by supermarket chain Coles in the wake of the global financial crisis.
In an agreement which took about six months to materialise, Coles has agreed to sell a 75 per cent stake in 19 shopping centres around Australia to property fund manager ISPT for $400 million.
While the vast majority of Coles' 750 stores are on leasehold property, the supermarket operator was forced to buy freehold land to roll out new stores when developers were unable raise funds in the aftermath of the GFC.
Wesfarmers finance director Terry Bowen said the deal continued the conglomerate's strategy to release capital from its balance sheet.
"This joint venture with ISPT progresses Wesfarmers' plans to recycle capital in business divisions that have experienced strong growth in freehold property," Mr Bowen said. "Wesfarmers will continue to look for innovative structures and partnerships such as this to create value for our shareholders."
The arrangement will see Coles retain a 25 per cent stake in the shopping centres - valued at $532 million - and management rights. Coles will also have development control over any new properties added to the portfolio.
Coles finance director Rob Scott said it gave the retailer the opportunity to secure funding for store growth plans. "By retaining property development and management rights, Coles can ensure that it has flexibility and control over both store format layouts and the in-store experience for our customers," Mr Scott said.
Rival Woolworths last year spun off its shopping centre assets into the listed SCA Property Group, now worth $937 million.
Wesfarmers in 1998 helped list BWP Trust to hold properties leased to Bunnings hardware stores, retaining a 24 per cent stake.
The unlisted ISPT manages more than $8 billion in superannuation funds. Assets include Forrest Chase, Perth City Central, and the 100 St Georges Terrace building.