Property fund manager BlackWall has abandoned a plan to float its co-working hub business and will instead buy back an operation that has been hit hard by the pandemic slowdown.
By early this year, ASX-listed BlackWall had completed the demerger of WOTSO, which runs a portfolio of co-working hubs across Australia and Malaysia. Shares in WOTSO had had been distributed to BlackWall shareholders, with 14 per cent retained by BlackWall itself.
As the co-working model boomed through last year, BlackWall had ultimately hoped to push forward with a public listing of the operator as early as this year.
But in the wake of the deadly coronavirus, cashflow dwindled across the hubs portfolio and WOTSO itself was forced to seek rent relief from its landlord BlackWall.
BlackWall has said it will buy back the WOTSO business, along with some real estate held in one of its managed funds, and staple shares in those assets to securities of the ASX-listed parent.
“It is expected the acquisition will secure WOTSO’s growth trajectory without the need to raise additional capital in an uncertain market,” BlackWall’s joint managing directors, Jessie Glew and Tim Brown, said.
“We do not expect the transaction to diminish BlackWall’s standing as a property investment trust as WOTSO is expected to represent less than 10 per cent of the expanded group’s assets.”
“This proposal replaces the previous strategy to undertake a standalone IPO of the WOTSO business, but it does not preclude this happening in the future.”
On completion of the transactions, BlackWall will have gross assets of nearly $400 million.
The WOTSO business had expanded rapidly, rolling out into 16 locations across four states in Australia, along with the ACT and a facility in Kuala Lumpur.
The operator had moved into shopping centres as well, with a facility at Westfield Woden in Canberra and another at Westfield Chermside in Queensland, the country’s first such co-working facility in a mall.
For Blackwall itself, WOTSO is one of its larger tenants. The co-working operator had allowed its members to suspend their memberships but the operator held their desks, awaiting their return following the lockdown.
Hub users had begun returning as restrictions eased in most seats, but not quickly enough for revenue to recover pre-COVID-19 levels.
WOTSO was eligible for rent relief from its landlord. From March, Blackwall said it had deferred rent for all WOTSO facilities in its portfolio, subject to review on a monthly basis.
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