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T&G bolsters balance sheet with $80m sale and leaseback

1st November 2021 By Bridget O'Connell | bridget@foodticker.co.nz | @foodtickernz

Produce giant T&G Global is undertaking a sale and leaseback of a post-harvest operation in the Hawke’s Bay in a move its says will generate $79.55m to support its growth strategy.

The 9.56 hectare site at 22 Whakatu Road, Hastings, is being sold to Property for Industry Limited (PFI).

T&G Global’s chief executive, Gareth Edgecombe, said the transaction would allow it to invest in its core business as well as new growth activities, and it comes as it faces a profit squeeze at the hands of Covid-19.

“By entering into a sale-leaseback agreement with PFI, we can unlock funds to reinvest back into our core business and new growth activities, while continuing to operate our post-harvest facilities out of the Hawke’s Bay,” Edgecombe said.

“With strong worldwide consumer demand for our premium apples, including Envy and Jazz, this capital will be used to fund our operations, continue building out our key global markets, and invest in new technology and our physical assets.”

Last month, T&G Global warned its profit for the 2021 financial year will come in between $4m – $10m, a potential contraction of as much as 76% from the $16.6m profit it posted in 2020.

T&G said the “disappointing” outlook reflected updated forecasts for business units suffering Covid-19 disruption, namely its apples, international trading, and T&G Fresh divisions.

The Whakatu Road property provides more than 36,000 square metres of T&G’s post-harvest operations in the Hawke’s Bay, including one of its packhouses, two cool stores, warehousing and 3.7 hectares of storage yard.

“The Hawke’s Bay is a pivotal region for our global business and long-term strategy, with about 60% of our apples grown in the region. With interest in commercial real estate at a real high, it made good business sense to recycle these funds into our growth,” Edgecombe added.

The 15-year triple-net leaseback arrangement with PFI provides T&G with rights of renewal for a further 20 years.

The commencing annual rental is $3.5m plus GST, with annual fixed rent reviews of 2.25%, with an adjustment to market on the seventh anniversary of the lease commencement date.

The unconditional acquisition, which reflects a yield of 4.4%, is expected to settle on 15 November 2021. Both parties will update the market upon the sale being concluded.

 

 


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