Viva Energy REIT set to float in August

Nick Lenaghan
Jul 11 2016
The $1.5 billion Viva Energy REIT, Australia’s only listed property trust owning service station sites, expects to hit the board on August 3 after winning strong investor support.
The property trust will hold the entire $2.1 million portfolio of petrol stations throughout Australia owned directly by Viva.
Viva itself was formed through oil trading giant Vitol’s $2.9 billion acquisition of Shell’s oil refinery and fuels-retailing business two years ago.
That portfolio, with its 425 Shell and Coles Express-branded sites, will make the new trust partly a proxy for the petrol industry, in the way the listed BWP Trust gives its investors a more secure exposure to the Bunnings hardware chain.
The new trust’s managing director is Margaret Kennedy, a veteran of the oil industry.
“This is not only a REIT but it’s unique in that it is a REIT of service station properties,”
she said on Monday. “We see ourselves as providing a new asset class that currently doesn’t exist in the REIT market in Australia.
“Shell and Coles Express are brands that are known to everyone. Just about everyone in this country at some time or another has visited a Shell Coles Express. It’s a known quantity.”
Viva Energy is the sole tenant for the properties. The entire portfolio has an average lease term of 15 years, on a triple net basis, which means the tenant is responsible for all property outgoings.
Those leases are subject to fixed 3 per cent annual rent increases. Viva will have seven 10-year options to renew its leases.
Ms Kennedy said additional growth could come from the acquisition of other sites, including those operating under different brands.
As well, Viva is a tenant, but not the owner, of other sites that will not come into the portfolio. For around 150 of those properties it has first right of refusal should they be offered for sale.
“They have stated that their intention is that they would make that first right available to the REIT,” Ms Kennedy said.
The portfolio is weighted to metro areas, and around 70 per cent of the sites are in Queensland, New South Wales, the ACT and Victoria.
“The portfolio has been put together over 100 years because that’s how long Shell/Viva has been operating in Australia,” said Guy Farrands, who is the new trust’s chief financial officer.
Viva Energy will hold and retain a stake of around 40 per cent in the new trust, which expects to deliver a 5.94 yield over 2017.
As Street Talk revealed last week, around 70 per cent of the $911 million raising was allocated to cornerstone investors. That leaves 15 per cent for other funds entering via the institutional bookbuild and the remaining 15 per cent for retail investors
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