This article is from the Australian Property Journal archive
THE Australian Unity Office Fund could merge with the unlisted Diversified Property Fund to create a new $1.2 billion vehicle, following a strategic assessment of the listed trust by its responsible entity.
The findings into the review of Australian Unity Office Fund (AOF) included that the fund would retain a focus active asset management and value-add initiatives, target index inclusion, and maintain a capital structure with target gearing below 40%.
In its overview of the proposed merger, Australian Unity Investment Real Estate Limited (AUIREL) said the a combined portfolio would comprise 18 assets with a $1.2 billion value across the office, convenience retail, and industrial sectors, with 96% occupancy and a weighted average lease expiry of 4.8 years.
Value-add capacity would come through in delivery of developments including 2 Valentine Avenue in Parramatta and the North Blackburn shopping centre in Victoria within the respective portfolios.
“The outcome of the strategic assessment refines the existing strategy, complementing AOF’s continuing core focus on office, with an expanded asset ownership mandate allowing AOF to own commercial real estate that aligns with the key asset attributes of affordability, accessibility and amenity,” AUIREL said.
AUIREL chairman, Peter Day said that in concluding the strategic assessment, the board determined to maintain AOF’s office focus in metropolitan and CBD markets, to be complemented by a targeted and diversified portfolio of Australian real estate assets.
“The fund will continue to focus on delivering sustainable and growing income returns through active asset management and value-add initiatives.”
The proposed merger would be subject to a number of hurdles including mutual due diligence, financing requirements and consents, execution of a binding implementation agreement, final board approvals and recommendations from the responsible entities and unitholder approval.
AOF had been the target of a takeover bid from US-based Starwood Capital that fell over last year, following a a proposed takeover by Abacus Property Group and Charter Hall that was thwarted by shareholders.
AOF yesterday updated its full year funds from operations guidance range to 18.5 to 18.7 cents per unit, reflecting the top end of the previously provided guidance range of 18.3 to 18.7 cents per unit.
AOF’s newly-announced fund manager, Nikki Panagopoulos, said the revised guidance reflects the strong collections and leasing outcomes achieved over the past year.
“Our focus into FY22 will include delivering on AOF’s refined strategy and executing on our active asset management and refurbishment programs, enabling AOF’s assets to continue to meet tenant requirements.”
Meanwhile, preliminary valuations of its eight assets came in at $639 million for the six months to the end of June, reflecting a like for like reduction of $10.7 million and a portfolio weighted average capitalisation rate of 5.85%.
The net valuation movement principally relates to an $18 million decrease in the value of 30 Pirie Street in Adelaide and an $8 million increase in the value at 2 Eden Park Drive in Macquarie Park.
At 10 Valentine Avenue in Parramatta, Property NSW did not exercise its five-year option by the end of June. AOF said management remains in active discussions with Property NSW.
