Merger of AUI property fund approved by investors

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Investors in Australian Unity Investments’ (AUI) Fifth Commercial Trust (FCT) have voted in favour to merge with AUI’s Office Property Fund (OPF)  at a meeting Melbourne today (Wednesday, 11 December 2013).

The proposal to merge the two funds will create a $370 million property fund holding office properties in New South Wales, Melbourne, Adelaide, Brisbane and Canberra.

Mr Mark Pratt, General Manager Australian Unity Real Estate Investment, said investors strongly supported the proposal, with 83.64 per cent of those voting supporting the merger.

Mark Pratt

“Australian Unity Funds Management, as the responsible entity, developed the proposal as it believed a merger of the two funds was in the best interests of investors and will deliver a number of key benefits to both groups.

“Investors in the FCT will now continue their exposure to the property market via an investment in the Office Property Fund – a diversified fund open to new investment that has been operating for more than eight years.

“The merger will broaden Fifth Commercial Trust investors’ diversification of properties by tenant and geography. As the Office Property Fund is open to new investment, it can also raise capital and acquire or dispose of assets in order to take advantage of market opportunities in line with Australian Unity’s philosophy of active asset management,” Mr Pratt said.

FCT was a closed-end trust that was due to terminate in 2015. With the merger, AUI sought to maximise the value of its remaining properties at 5 Eden Park, North Ryde NSW and 30 Pirie Street, Adelaide SA (already 50 per cent owned by the Office Property Fund).

“The merger allows FCT to effectively transfer its interests in both properties to OPF at an agreed valuation which removes the reliance on the risks of a sale process, and involves limited selling costs.

“Having spoken with a number of investors, many of them indicated to us they would like to maintain an investment in the Australian property market beyond Fifth Commercial Trust’s scheduled termination in May 2015,” Mr Pratt said.

The merger provides investors in FCT the opportunity to realise all or part of their investment through an initial $15 million capped withdrawal offer, equating to approximately 25 per cent of the FCT’s net asset value. They may also have the opportunity to defer any capital gains tax on their investment by opting for scrip for scrip rollover relief.

“It is also our recent practice, and future intention, to provide investors in the OPF with the flexibility to withdraw through half-yearly capped withdrawal offers,” Mr Pratt said.

Investors in OPF will also benefit from the proposed merger as it is positive for earnings, distributions, portfolio occupancy and the weighted average lease expiry profile, plus it increases the ownership of the OPFs flagship asset located at 30 Pirie Street, Adelaide, from 50 per cent to 100 per cent.

As at 30 November 2013, the Office Property Fund has returned 7.71 per cent over one year, 8.87 per cent over two years and 7.09 per cent over three years*. Once the proposal is implemented, the combined fund is expected to have an occupancy rate of 94.86 per cent and a strong weighted average lease expiry of 5.25 years.

Australian Unity Investments is the funds management arm of Australian Unity – a national healthcare, financial services and retirement living organisation. 

Australian Unity Real Estate Investment has over $1.7 billion in funds under management (as at 30 November 2013). Its unlisted property funds and syndicates own more than 56 properties in the healthcare, retail and commercial sectors, in Victoria, New South Wales, Queensland, Australian Capital Territory, Western Australia and South Australia.

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For more information please contact:

Mark Pratt – Mobile: 0408 611 539

Mark Lumby – Mobile: 0413 940 992

 

 

 

*Past performance is not a reliable indicator of future performance. 

 

11 December 2013