This article is from the Australian Property Journal archive
Cromwell Property Group and Australian Unity have struck a deal to merge unlisted REITs to form a new fund valued at $1.1 billion.
The tie-up will see the Cromwell Direct Property Fund (CDPF) and the Australian Unity Diversified Property Fund (AUDPF) join forces.
“The merger will result in unitholders in CDPF and AUDPF both owning interests in a more diversified and stable fund with improved geographic and sector diversification, and strong weighted average lease expiry and occupancy metrics,” Cromwell said.
The fund will have 15 assets across the office, retail and industrial sectors, including CDPF’s Brisbane office towers at 100 Creek Street and 545 Queen Street and the 95 Grenfell Street building in Adelaide, while AUDPF will bring to the table assets including the Dog Swamp Shopping Centre in Perth’s northern suburbs.
Separately, Cromwell has entered into a share sale and purchase agreement with Australian Unity Limited to acquire AUPL, the responsible entity of AUDPF, for a total consideration of $17 million, payable in instalments. A condition to that deal is AUDPF unitholder approval and implementation of the merger.
Cromwell’s chief investment officer Rob Percy said the proposed transaction aligns with Cromwell’s strategic exit from non-core assets and recycling of capital to grow Cromwell’s funds under management, adding approximately $425 million in third-party gross assets to its Australian platform.
“This transaction continues our journey to a capital-light funds management business model and enables us to continue to provide Cromwell investors with long-term stable and risk-adjusted returns.”
Australian Unity’s, chief investment officer and executive general manager, funds management, Joe Fernandes said the merger would create a combined fund that “benefits investors through increased scale, diversification, and income and distribution stability”.
“Cromwell’s reputation as a leading real estate funds manager and a custodian of investors’ capital places the combined fund in good stead for future success. We look forward to working with Cromwell to preserve and enhance value for investors.”
As part of the proposed merger, the Cromwell Diversified Property Trust will subscribe for units in CDPF, up to $12 million, to assist in funding a one-off withdrawal facility for AUDPF unitholders.
The merger is conditional upon AUDPF unitholder approval and other conditions. If met, the merged fund will adopt CDPF’s existing framework and AUDPF unitholders will be issued units in CDPF.
It is expected that the merger will be completed in late 2023.
Cromwell has engaged Highbury Partnership as its financial adviser and Gilbert + Tobin as its legal adviser on the merger. Greenhill has been working for Australian Unity.
