Wolseley saves £30m on rent deal
Published: 17 October, 2011
LEAMINGTON SPA: Wolseley will save about £30m using an outsourcing deal that brought an end to most rental agreements on 163 surplus properties.
Legacy Portfolio said it received £47m in June 2010 to help Wolseley get out of leases for the buildings, mostly warehouse outlets.
Legacy has since terminated 120 leases after settling with the landlords and found tenants at some other properties to replace Wolseley, according to a statement from the companies.
The payment to Legacy covers all the future rent that Wolseley owes for the surplus properties, so Wolseley no longer has to make provisions for them in its accounts.
The deal is the UK's largest lease liability transfer to-date, Cushman & Wakefield said. It means Wolseley will pay 61% of the £77m originally that was due until all the leases expired.
"This transaction has allowed us to focus on our core operational objectives and ensured that the needs of the branch network are fully supported," Andrew Pickett, Wolseley's UK property director, said in the statement.
The deal is part of the plan by Ian Meakins, chief executive, Wolseley, to reduce the company's size, eliminate debt and cut costs. Pre-tax profit for the 12 months through July was £391m compared with a £328m loss a year earlier, the company reported earlier this month.
Mr Meakins sold peripheral businesses and cut the branch network of Wolseley's brands. That left the company with 177 properties in the UK that it no longer needed, 14 of which it owned. It chose Legacy after a tender that included eight other companies.
Legacy, owned by its managers and private individuals, makes its money by keeping as much as possible of the lump sum it receives after disposing of the surplus leases through sister company FraserCRE.
"There can be no greater comfort that the risk has been removed completely than a surrender," Alexander Anton, chairman, Legacy said in the statement. "Our success in doing so in 75% of the properties is due to our structure and execution capabilities."
Legacy declined to comment on the profit it expects to make on the Wolseley deal.