More Masters drama: Charter Hall pounces on $180m of stores

By | septiembre 29, 2017
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The unfolding saga of the Masters collapse has taken a new twist with diversified property fund Charter Hall Group seizing control of a portfolio of six former Masters stores worth around $180 million.

Charter Hall will take over the Bunnings-leased properties in Western Australia, NSW and Queensland in a deal that will return a significant chunk of capital to the consortium of wealthy families who last year outlaid $830 million to scoop up the former Masters stores from retail giant Woolworths.

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How could the masters of Masters, Woolworths and US partner Lowe’s, go so spectacularly wrong?

Charter Hall, led by David Harrison, has long coveted Masters’ assets.

It steered a consortium of property heavyweights that included Bunnings, Harvey Norman and US retail titan Costco in a failed bid to snare the former hardware chain’s entire portfolio of 61 stores and 21 development sites when they were being offloaded by Woolies.

Instead Home Consortium, led by UBS banker David Di Pilla, outfoxed Charter Hall and other larger property players to take control of the assets.

Home Consortium would not comment on the deal with Charter Hall.

Wesfarmers-owned Bunnings has long confirmed its interest in taking on at least 15 of the old Masters stores in different locations across the country.

The chain was quick to begin negotiations with Home Consortium once it gained control of the portfolio, installing its signature red hammer logo on numerous leasehold and freehold sites.

The former Masters stores snapped up by Charter Hall were sold with long-term leases in place to Bunnings.

Large-format retail leases typically stretch to 20 years with several options to renew.

The hardware chain has initiated development plans that will allow it to reformat the Masters sites to suit its retail offering.

Andrew Marks, general manager property at Bunnings, previously confirmed that Bunnings would take over the former Masters site in Albion Park in NSW.

The group has also received development approval to convert the Rockhampton Masters store in Queensland and several others in WA – Wangara, Bayswater and Mandurah – into Bunnings stores.

Another former Masters store in NSW, to be occupied by Bunnings in Hoxton Park, is also part of the deal.

Mr Marks did not return calls on Thursday from BusinessDay for comment. Charter Hall was approached for comment on Friday.

The group, which controls a portfolio of 168 retail properties worth $5.5 billion, is understood to be purchasing the Home Consortium properties for its existing Long Wale Hardware Partnership, which controls assets valued over $700 million.

«Our strategy in the retail sector is to continue to provide a secure and growing income stream for our investors,» Charter Hall’s annual report released on Friday says.

«We do this in two ways; one is through non-discretionary convenience-based shopping centres and the other is through single-tenant long-leased assets with tenant customers including Bunnings and ALH Group.»

Another key part of Charter Hall’s growth strategy is exposure to Australia’s leading retail companies, Woolies and Wesfarmers.

«We are harnessing an understanding of their property needs across our retail, office and industrial and logistics sectors to provide total solutions for their property requirements,» it said. 

Charter Hall recently began collecting assets to seed a new consumer staples fund, paying $21 million for a Bunnings Warehouse-leased property in Tasmania.

The group purchased the store in Burnie, on Tasmania’s north coast, via its balance sheet for an initial yield of 6.1 per cent.

The 3.04-hectare site will be the first property to underpin Charter Hall’s Direct Diversified Consumer Staples Fund (DCSF) which is set to launch next month.

The group is understood to have earmarked several more assets for the fund, which is targeted at giving investors exposure to retailers on long-term leases.

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