Wesfarmers is looking at freeing up hundreds of millions of dollars by bundling together some of its Coles shopping centres into a co-owned property investment portfolio.
The group declined to comment on reports yesterday of the possible venture but sources confirmed Wesfarmers had appointed advisers from Jones Lang LaSalle, Goldman Sachs and RBS to sound out potential institutional investors.
Investors applauded the news, sending Wesfarmers shares 1.1 per cent higher as the broader market rose just a few points. The gains extended a rally which has seen the stock add 23 per cent since May.
Wesfarmers is said to be looking at a partnership over 25 company-owned Coles centres worth about $700 million.
Just last month, Woolworths announced something similar, with plans to spin off nearly 70 stores and centres valued at $1.4 billion into a new real estate trust.
Wesfarmers, however, apparently does not plan to create a separate vehicle, preferring instead to retain control and the flexibility to either expand or refurbish the centres in the future.
The group, which is approaching the fifth anniversary of its purchase of Coles, has about property valued at about $2.6 billion on its books. The lion's share of Coles' space is leased from other owners.
Wesfarmers has been down a similar route before, helping list Bunnings Warehouse Property Trust in mid-1998 to hold properties leased to its Bunnings hardware business. It retains 23.5 per cent of the renamed BWP Trust.
Wesfarmers' rising share price has been aided by an improving food retail outlook which is expected to see both Coles and Woolworths disclose stronger like-for- like first-quarter sales growth over the next 10 days.
Woolworths' quarterly results are due tomorrow and Coles' next Thursday.
Morgan Stanley said last week that the first-quarter sales numbers should be boosted by easing deflation and higher prices for fresh produce.
Despite the ongoing drag on sales from Coles' poorly performing liquor arm, the broker tips the growth in Coles' earnings before interest and tax will accelerate to 19 per cent this financial year from 15.6 per cent last year.
First-quarter sales numbers should be boosted by easing deflation."