This article is from the Australian Property Journal archive
Babcock & Brown and GPT have canned the Babcock & Brown GPT European Retail Fund a day after its planned listing.
BGER was expected to list on the European cross-border exchange, Euronext Amsterdam N.V. Eurolist on December 06, 2006.
However, yesterday, the JV said the proposed IPO would not have sufficiently realised the full value of the initial portfolio.
Instead, the JV said it will pursue alternative options for European Retail Real Estate Fund.
This is the third high profile listing to be scrapped since the beginning of the financial year. Last month, retail giant Westfield pulled the plug on its much anticipated $2 billion after the retailer would not agree on a number of conditions set out by investors.
And in July, global insurance giant Allianz withdrew its $350 million Allianz Global Investors European Property Trust from the market, citing a change in tact following a global review of REITs conducted by Allianz GI.
GPT’s chief executive Nic Lyons said the withdrawal from the IPO process does not alter the joint venture’s strategy to create and grow a funds management business.
“This move simply reflects both GPT and Babcock & Brown’s determination that an IPO at this time was not going to achieve an optimal outcome for the joint venture in the proposed structure.
“We continue to work on a number of initiatives within the joint venture and remain focused on the creation of long term enterprise value.” Lyons said.
In November, the JV planned to list the close-ended investment company to the exclusive to European institutional investors at €15.20 to €17.00 per ordinary share to raise approximately €400 million ($666 million).
BGER was to be seeded with a portfolio of retail assets with a gross asset value of approximately €1.5 billion comprising 294 retail assets. Of these assets, properties with a value approximately €400 million will be acquired from the joint venture. The remaining assets valued up to €1.1 billion will be acquired from Babcock & Brown.
Property Investment Research’s head of research John Welch said the three week due diligence timeframe the JV had set to institutional investors was tight and it would appear they were unable to gain support in that short period of time.
Welch said the investment company had forecast an 11% return on equity, with 5.5% contributions from dividends and 5.5% from capital growth.
However, he added, the investment company was only paying the 5.5% dividend from €400 million out of the €1.5 billion worth of assets.
Welch said the dividend would have totaled €22 million, so in reality the return on equity was probably 3% – with 1.5% divided equally between dividends and capital growth.
Having said that, Welch said the JV could easily pursue alternative structures.
“They can create a separate REIT and provide funding themselves, which the JV should be able to do.” he concluded.
According to Babcock & Brown’s chief executive Phil Green, a better outcome can be achieved through other capital raising and structuring options, including through the syndication of equity in the portfolio assets to the direct investment market and/or the creation of a more simplified REIT structure, taking advantage of the introduction of new legislation in specific European markets.
“We are very confident of the high quality and values of the properties in the portfolio.
“In light of the market’s response to the proposed IPO and given the depth of the direct market interest in quality assets with a strong defensive cashflow profile such as these, we will pursue alternative options and expect to see the assets bedded down in a long-term managed structure during 2007.” he added.
By Nelson Yap
