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Long Leases Woolworths

Discussion in 'Commercial Property' started by Beano, 13th May, 2016.

  1. Beano

    Beano Well-Known Member

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    I am looking a small Woolworths supermarket (3,300m2) that has a good long lease 25 years
    Has anyone had any problems with these types of properties and dealings with Woolworths ?
    Its has a net rental of $1.3m likely yield around 6pc
     
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  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    If financing is involved the lease needs to fit with lender requirements. A good commercial broker helps. Lenders go hot / cold with various property types and locations. Woolworths did have a process of flicking property leases to the new property trust (SCA)...Why not this one ?
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    Not tied to a shopping centre development?
     
  4. Beano

    Beano Well-Known Member

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    Not certain
    I am waiting for the IM
    I like the long lease
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    It might be a long lease but could be short on favourable clauses (who is the vendor)?
     
  6. Omnidragon

    Omnidragon Well-Known Member

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    Yea looked at one recently - different scenario, it was actually on a short lease. Problem with Woolworths leases is they're often tied to revenue. Your $1.3m is probably not a fixed figure. So you'd have to take a view on that.

    I was looking at the short lease site because I wanted a development site. Not sure on being stuck there and getting 5-6% yield (assuming your rent fluctuates with Woolworths revenue).
     
  7. Luke T

    Luke T Well-Known Member

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    How do you think woolworths will go in the future with aldi and others coming in?Their business is based on high outgoings,expenses and turnover
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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    Their occupancy costs are generally quite low - Blue chip tenant, ASX listed, Anchor tenant in subregional/neighbourhood centres (also a developer in neighbourhood centres). They 'sell' shelf space to their suppliers further reducing their own occupancy costs.
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I like the Aldi model. They buy a site and develop it to a larger use than a single store and sell it all. Then lease back their own site. The basic strategy results in a site that adds cashflow upfront from profit and sale.

    Woolworths sale of its properties to SCP etc hit a issue when they realised the complexity with improving a site. They have exchanged ownership of sites with cashflows from property sales and meant they are now burning their way through what was once equity.

    Ansett used to own a substantial terminal and hanger presence in Australia. Whats that worth ?
     
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