Supermarket wars

Crafty Coles' property plan leaves Woolworths with egg on its face

By RJ Whitehead

- Last updated on GMT

Related tags: Coles

Crafty Coles' property plan leaves Woolworths with egg on its face
Some say it was sneaky, others say it was shrewd, but whatever the motivation, the latest stunt by Coles against its super-rival Woolworths has set the cat among the pigeons in the battle for Australian supermarket supremacy.

Farfax Media, one of the country’s biggest publishers, claims to have obtained documents that reveal that Coles is now the landlord of one of Woolworths’ supermarkets in Sydney’s upmarket Neutral bay after it used an elaborate tax haven structure to conceal its identity while buying one of its rival’s most popular stores.

Woolies ‘surprised’

This is a surprise, and it's not common practice by any means. I'm not going to commentate on what Coles' motivation is. That's for them to answer​,” Fairfax quoted a Woolworths' spokeswoman said after hearing of the report.

Coles concealed its involvement in the deal by using a A$10 company ultimately owned in the British Virgin Islands—a tax haven—to purchase the 4,282sq-m Sydney site. Woolworths had reportedly leased the property for nearly 18 years and was reaping more than A$75m in sales each year.

Fairfax newspapers have reported that internal Coles documents show the purchase price was A$40 million, a record price for a freestanding supermarket in Sydney. Coles is believed to have paid a premium of as much as 30% above its value to secure the site.

Coles confirmed that it had bought the property but declined to comment on what its plans were. However, under the terms of the lease, Coles as landlord has the right to inspect Woolworths' sales records and the site. The lease will expire next year but can be renewed for another 10 years.

Tit for tat?

There has been speculation that the property fight was precipitated last year when Woolworths threw Coles out of a store in Katoomba, west of Sydney, that it had bought in 2000. That departure by Coles marked the end of its presence on the site after 30 years.

Coles was apparently so worried about revenge for its move in Neutral Bay that it assessed the risks of Woolies retaliating across 120 Coles stores.

But it seems that any hope Coles has that Woolworths will leave Neutral Bay rather than pay rent to its arch-rival is set to be dashed.

''The current lease is up in November 2014, with a 10-year option to extend. We will take up this option,'' the Woolworths spokeswoman said.

Have your say: What do you think about Coles' latest move - genius or pretty low down? Let us know in the box blow.

Related topics: Business, Oceania

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