At least $24 billion in capital could be unlocked by 40 of Australia and New Zealand’s top listed companies if they sold and leased back the real estate assets they occupy, says CBRE.
“Freeing up property assets from corporate balance sheets is an attractive way for organisations to redeploy the capital tied up in a low-yielding property back into their business at higher rates of return,” says Sameer Chopra, CBRE’s Pacific head of research.
“This $24 billion monetisation opportunity could also be understated, given the recent strong performance of the industrial property sector, where owner occupier transactions have been particularly prevalent.”
CBRE examined the land and buildings currently held on balance sheets across 40 ASX200 and NZX50 listed companies in five sectors: materials, healthcare, telecommunications, transport and industrial.
Owner-occupiers in these five sectors average a seven per cent capex-to-sales ratio, while 60 per cent have a return on equity in excess of 10 per cent. This highlights the opportunity to reinvest capital into other opportunities such as acquisitions, debt repayments or shareholder returns.
Tome Fowke, CBRE’s Asia Pacific director for corporate capital markets notes the growing trend for corporate occupiers to strategically monetise their real estate to raise capital and increase liquidity “while not losing occupational control of their property assets”.
The most actively traded property type for this type of arrangement over the last five years was retail, which represented 23 per cent of the transactions in Australia and New Zealand. This was followed by petrol stations (18%), communication assets (18%) and food and beverage properties (15%).
ALDI, Coles, David Jones, Myers, Wesfarmers, via the sale of Bunnings warehouses, and Woolworths have all transacted in the last five years.
Industrial and logistics assets are attractive assets, but utilities could also be a fruitful sector for property divestment. However, Chopra notes land and buildings in this sector are typically bundled in with power generation on corporate balance sheets, making it harder to analyse the true book value of property assets in this sector.
Of the 25 owner-occupier deals worth more than $100 million is Charter Hall’s 49 per cent acquisition of 295 BP service stations in 2019 for $1.08 billion. This was the region’s largest owner-occupier portfolio sale on record. However, 77 per cent of transactions since 2015 were under $50 million.
Figure 1: Market share of owner occupier sales by property type