Caltex plans $1b property IPO

Caltex plans $1b property IPO

29 November 2019

Caltex plans to ­embark on a $1bn property float made up of a half-stake in 250 of its retail sites as it seeks to tap investors chasing yield against the backdrop of low global interest rates.

The plan is to move those 250 sites into an unlisted property fund, with 51 per cent held directly by Caltex. The remaining 49 per cent would be held in a real estate investment trust which would likely list on the Australian Securities Exchange in the first half of next year.

Rent from the 250 sites would come in at $80 to $100 million annually, suggesting the freehold portfolio would be worth as much as $1.8 billion, according to industry estimates.

Caltex has appointed UBS and Grant Samuel as its financial advisers with UBS as lead manager for the proposed IPO. Herbert Smith Freehills as legal adviser.

Early expectations are for a dividend yield from the mooted petrol station trust of between 5 per cent to 6 per cent.

“The primary attraction is the hunt for yield in the market at the moment, the Caltex brand, the core nature of these sites: [this] means they are highly attractive to the equity market when we look at where that cycle is at the moment,” Caltex chief financial officer Matt Halliday told The Australian Financial Review.

A similar strategy has been deployed out by other companies this year, including Telstra and Arnotts, which have looked to capture pent-up demand for long-hold, steady-return property assets by carving off parts of their real estate book.

The Caltex petrol stations also have a strong retail element through the joint venture with Woolworths, with this element of convenience retailing still sought after by investors even as larger department store-anchored cen­tres are suffering.

“We think the Caltex REIT proposal will be well received as it unlocks value from the freehold sites via a strong REIT market,” RBC analyst Ben Wilson said.

Caltex also issued an update on its convenience retail business, with annual earnings before interest and tax expected in a range of $190m to $210m, up from $85m for the first half of this year, reflecting ­improving fuel margins.

“Despite the softer conditions from ongoing Australian economic weakness, Caltex has continued to outperform our competi­tors in the retail fuel market by leveraging our fuel supply chain expertise and our high-quality ­retail network,” chief executive Julian Segal said.

Moody’s Investors Service views Caltex’s proposed IPO as having no impact on the petrol giant’s credit rating, given the company’s strong financial profile and “track record of maintaining conservative credit metrics”.