Waypoint Sell 31 Assets and find Valuation Gains

30 July 2021

Waypoint REIT has confirmed that is has agreed to sell 31 non-core assets to the Fawkner Property Group and announces a 10% increase in June 2021 valuations and related capital management initiatives.

WPR has agreed the sale of 31 non-core fuel and convenience properties to trusts managed by Fawkner Property Group for a total purchase price of $113.9 million, representing a 10.1% premium to WPR’s carrying value
as at 31 December 2020 of $103.4 million.

The Fawkner transaction is subject to Rights of First Refusal (ROFR) in favour of Viva Energy Australia (VEA) and Coles Group (Coles), which provide a period of 30 days in which VEA or Coles can elect to acquire any of the properties on the same terms as agreed with Fawkner. Assuming the ROFR provisions are not exercised by VEA or Coles:

  • 29 assets ($102.7 million combined purchase price) will settle in three tranches by the end of October; and
  • The remaining two assets ($11.2 million combined purchase price) will settle ten business days after WPR is able to provide clear title to these assets.

Following completion of the Fawkner transaction, WPR will have sold 34 non-core assets year-to-date for a combined price of $121.9 million, representing a premium of 10.9% to WPR’s prevailing carrying value (June 2020 or December 2020). A further twelve assets (eight regional and four metropolitan) with a combined book value of $35.3 million have been identified as non-core and will be held for sale in WPR’s accounts at 30 June 2021. WPR intends to market these assets for sale in the second half of 2021.

WPR has also announced that it has completed its 30 June 2021 valuations, with independent valuations carried out on 82 properties and directors’ valuations on 388 properties (including the Fawkner properties, which have been revalued in line with the contracted sale price).

The valuations shows a gross uplift of $189.8 million (representing a $0.24 or 10% increase in NTA per security) was recorded for the six months to 30 June 2021 due to a combination of contracted annual rental increases and capitalisation rate compression.

The WACR on WPR’s ongoing portfolio of 427 properties tightened by 19bp from 5.56% at 31 December 2020 to 5.37% at 30 June 2021, representing a gross valuation uplift of $176.1 million (6.4%).

In order to maintain an efficient capital structure following the non-core asset disposals and the June valuation process, WPR is proposing to implement capital management initiatives with a total value of up to $150 million, approximating the estimated proceeds from non-core asset sales in 2021.

The final quantum, structure and timing of the capital management initiatives remain subject to satisfactory progress of non-core asset sales (including settlement of the Fawkner transaction) during the second half of 2021. The capital management initiatives will take the form of an on-market buy-back and, potentially, a capital return with an associated consolidation of WPR’s securities on issue (which would require securityholder approval).

If fully implemented, the proposed capital management initiatives would be accretive to WPR’s Distributable EPS due to the reduction in WPR securities on issue and would therefore offset the dilution caused by the non-core asset disposals outlined above.

WPR has today lodged an Appendix 3C for a proposed buy-back of up to 29.0 million WPR securities (Buy-back Program), or approximately $75 million. The first trading day that WPR will be able to buy securities under the Buy-back Program is Monday, 16 August 2021.

WPR is also considering a pro-rata capital return of up to $150 million, with a final decision on the quantum and timing of the capital return (if any) dependent upon the progress of both the Buy-back Program and the non-core asset disposals outlined above (including settlement of the Fawkner transaction).

Any capital return would likely be accompanied by a proposal to securityholders to approve an equal and proportionate security consolidation, which would adjust the number of WPR securities on issue for the quantum of the capital return. If implemented, the security consolidation would counteract the theoretical impact of the capital return on WPR’s trading price and NTA per security and would also enable WPR to maintain a consistent Distributable EPS profile that is not distorted by the non-core asset sales and associated capital return. Each securityholder’s proportionate interest in WPR would remain unchanged, subject to the rounding up of fractional entitlements.

If WPR determines to proceed with the capital return and security consolidation, the security consolidation would be subject to securityholder approval at a General Meeting expected to be held in the fourth quarter, with further details to be provided to securityholders once a final decision to proceed has been made by the Board.

WPR’s FY21 Distributable EPS guidance remains unchanged at 15.72cps, representing 3.75% growth on FY20.

WPR’s Chief Executive Officer, Hadyn Stephens, said “The disposals announced today demonstrate WPR’s commitment to active portfolio management, with continued strong demand at present for fuel and convenience assets providing a compelling opportunity for WPR to realise attractive prices for non-core assets and improve overall portfolio quality. WPR will continue to evaluate opportunities to sell assets where we believe that it is in the best interests of securityholders to do so.”

“The proposed capital management initiatives also reflect our commitment to responsible stewardship of our investors’ capital, allowing WPR to return capital in excess of current requirements whilst maintaining a strong financial position to capitalise on investment opportunities that may arise in the future, noting that selective acquisitions and reinvestment in our core portfolio remain key components of our strategy moving forward.”