- The new trust is a joint venture with Goodman Group
- BKW will retain 50.1%, with 49.9% going to Goodman
- Initial WALE for the portfolio is 16 years
Australia’s largest brick manufacturer, Brickworks (ASX: BKW) today announced the launch of the Brickworks Manufacturing Trust.
A joint venture with Goodman Group, the trust will initially include a portfolio of 15 manufacturing plants, tenanted by the Brickworks’s business, including Austral Bricks, BRistille Roofing, Austral Masonry, and Austral Precast. The leases are between 5 and 20 years, with the weighted average lease expiry (WALE, by income) initially 16 years.
The 15 properties comprise 496 hectares in land area and have a gross asset value of $416 million (100% interest). The majority of properties (by asset value) will be in Queensland (38%), with 36% in Victoria, 14% in WA, 6% in NSW, 5% in SA, and 1% in Tasmania.
The gross value of the Brickworks Manufacturing Trust assets of $416 million represents a premium of $280 milion to the current book value of those assets (after allowing for various transaction-related costs and provisions).
BKW said the transaction will trigger a net profit on sale equivalent to this uplift, to be reported by Building Products Australia. In accordance with AASB 16 Leases, around $90 million of this pre-tax profit will be recorded up front in 2H2022. with the remainder deferred, and recognised over the life of the property lease term.
The sale of the properties will deliver gross cash proceeds to Brickworks of $207 million, representing 49.9% of the asset value. After allowing for tax, duty and transaction costs, net proceeds of around $193 million are anticipated, with these proceeds to be used to pay down Group debt.
“The partial sale and lease back of these properties will deliver significant cash proceeds, allowing Brickworks to realise value for shareholders and capitalise on the strong growth in industrial land values over the past few years,” said Brickworks Managing Director Lindsay Partridge.
“Importantly, the lease terms have been structured to ensure minimal impact to the operational flexibility of our Building Products businesses, which will continue to operate on these sites.”
“The creation of this new property trust to house our manufacturing plantsis the next step in our property strategy. Goodman are the undisputed market leaders in industrial property and have been instrumental in driving the growth of our existing Industrial JV Trust. Together, we plan to actively manage the new Brickworks Manufacturing Trust, in which there are several properties that have the potential for additional development and greater utilisation.”