Kylar Loussikian, 01 December 2015
Viva Energy’s plan for a $2 billion petrol station real estate investment trust could be nearer to realisation after the Victorian Supreme Court sided with the company over its major tenant, Coles.
Viva, controlled by Dutch energy and commodities giant Vitol Group, hopes to float a 400-property portfolio of service stations. It began a non-deal roadshow in October.
But Coles, which operates more than 300 of those Shell-branded service stations, had contended, through its subsidiary Eureka Operations, a listed REIT would affect its rights as a tenant, and, crucially, its first right of refusal on the sale of any of the properties.
There was also contention about the relationship between Eureka, Viva and a sub-trust trustee that would be the owner of the properties if a trust was formed.
Viva told the court the structure of the proposed arrangement was “carefully designed to protect Eureka’s rights”.
However, Eureka said the proposal “constitutes the grant of a right to use or occupy the leased premises during the term of the (agreement)”.
That argument, however, did not find favour with judge Clyde Croft, who dismissed the proceedings on Friday.
A Coles spokesman did not rule out an appeal, which would further delay float plans. “Coles Express remains committed to its partnership with Viva, and we will continue to work together to provide Australian motorists value at the bowser and a great convenience range in Coles Express stores,” he said. “We are examining the court’s decision and will consider our options.”
Vitol, which last year paid almost $3bn for Shell’s service stations and brand rights, as well as a refinery and wholesale business, also considered an unlisted wholesale fund for the portfolio. An unlisted fund could use the 15-year leases on the service stations to attract pension funds that have a longer term investment horizon.
If the trust was geared at about 50 per cent and Viva retained a 30 per cent to 40 per cent stake, the group would seek to raise $600 million to $700m of equity.
The company, which controls more than 860 petrol stations across the country, has retained Deutsche Bank and Bank of America Merrill Lynch as advisers.
The group has enlisted Margaret Kennedy to run the vehicle, with the help of veteran property executive Guy Farrands.
A Viva spokeswoman told The Australian that the company “acknowledges the decision”.
“Viva remains committed to the alliance and is excited about the opportunities to grow the retail business with Coles Express,” she said.
Extracted in full from The Australian.