Viva Energy is understood to be weighing the sale of a portfolio of its petrol stations, most likely as a sale and leaseback, where the company sells the freehold and signs long leases to keep operating the sites. The operating brand would not change. The owner of the underlying property would.

What a sale and leaseback involves

A sale and leaseback frees up capital tied up in property while the seller keeps running the business on top through long leases. Viva’s property, plant and equipment was valued at around $2.97bn in December. The company is also still working through the aftermath of the fire at its Geelong refinery, which cut petrol output to about 60 per cent of normal before a planned recovery to above 90 per cent. Viva spent approximately $1.15bn buying the On The Run convenience business from Peregrine, adding around 205 company owned stores.

Fund appetite for service station property

Service station and convenience property has become a sought-after asset class for large funds, valued for its long leases, essential service tenants and high traffic locations. Charter Hall, for example, holds with GIC and its listed retail fund a 49 per cent interest in 204 convenience retail sites leased to Ampol. That appetite is part of the backdrop to a potential Viva sale.

What’s next

Any deal is unconfirmed. If one proceeds, the detail to watch will be which sites are included, the lease terms attached, and who ends up as the landlord. A large block of corporate sites changing hands would be a notable move in the Australian service station property market.