Masters sale puts spotlight on large format retail

As part of the wash-up from its failed foray into the home improvements sector, Woolworths has agreed to sell the property component of its Masters home improvements business for $725 million.

The sale will make the purchaser, Home Consortium, the largest owner in the burgeoning large format retailing sector in Australia, which is now worth more than $65 billion a year.

Woolworths holds the Masters properties in a joint venture with US company Lowes. Home Consortium will purchase Woolworths’ shares in the joint venture company, Hydrox Holdings.

In the deal, Home Consortium, which is controlled by the owners of Chemist Warehouse, Spotlight Group and aged care provider Aurrum, will acquire more than 700,000 sqm of large format retail space, overtaking such owners as Harvey Norman and Bunnings landlord BWP . 

The Masters portfolio comprises 40 freehold trading sites, 21 freehold development sites and 21 Masters leasehold sites. Woolworths will acquire three Masters freehold sites and take assignment of 12 leases from the joint venture to finalise the divestment. The company has announced all Masters stores will close in December this year.

Home Consortium plans to redevelop the Masters stores into multi-tenant large format centres, with the first to open in mid 2017. Pre-leasing is already well underway with Wesfarmer’s-owned hardware giant Bunnings planning to vacate seven of its BWP-owned warehouses to move into former Masters properties. Other high profile tenants will include JB Hi-Fi, The Good Guys and Dan Murphys.

Woolworths will net more than $1.5 billion from the Masters divestment, which also includes the sale of the inventory to GA Australia and the purchase by Metcash of the Home Timber & Hardware Group for $165 million.