Viva Energy REIT is an ASX-listed real estate investment trust that gives investors exposure to 425 high-quality metropolitan and regional service station assets across Australia. Viva only recently joined the ASX, listing in August at $2.20 a security.
The REIT was conceived when Viva, the country’s largest private fuel company, spun off its property assets from its balance sheet. As a result, Viva is the sole tenant of the REIT’s properties, which subleases the stations to Coles Express. All the sites operate under an alliance agreement between the two, where Coles Express runs the retail operations and Viva supplies the oil products. The stations are run under the Shell brand, maintained through a long-term licensing agreement.
Viva’s service station portfolio was recently valued at $2.1 billion, netting an NTA of $2.07 a security. The lion’s share of the REIT’s portfolio is weighted towards the Eastern seaboard, with 80 per cent of the portfolio’s rental income attributed to NSW, Victoria and Queensland.
The split of the portfolio between metropolitan and regional stations is roughly 75 per cent and 25 per cent respectively.
Viva has a number of lucrative investment attributes, including a triple lease structure, considerably reducing its capex obligations and indemnity protection from Viva in the event of potential environmental damage. It has a long-dated WALE (weighted average lease expiry) just shy of 15 years with 100 per cent occupancy, combined with contracted rental increases of 3 per cent. Viva has maintained a 40 per cent holding in the REIT after the spin-off.
The trust is undertaking the acquisition of a further four service stations in NSW, Queensland and the Northern Territory for $26.2m. These were earmarked in the prospectus and will likely push gearing to the middle of management’s range of between 35 per cent and 45 per cent. After settlement of the transaction, Viva will still have scope for further acquisitions.
The REIT offers exposure to a long WALE portfolio of assets with high certainty of revenue, contracted rental increases now well above inflation and an attractive yield, combined with the potential for further growth through acquisitions.
At current prices, Viva offers a 12-month forward yield of almost 6 per cent — good value to an income-focused investor.
Extracted from The Australian.