This article is from the Australian Property Journal archive
GROCON’s Daniel Grollo is ready to take make the leap into the publicly listed arena with a $1 billion real estate investment trust.
Grollo hinted that Australia largest privately owned construction company which started as a humble concreting business by his grandfather, will be spreading its wings further into funds management.
Grocon already operates an unlisted vehicle, the Grocon Property Trust Australia established in late 2005 to fund construction of the AXA Asia Pacific headquarters at 750 Collins St in Melbourne’s Docklands precinct.
In an interview following his speech at Property Council’s Business Lunch, Grollo said the company is looking to bundle up $1 billion worth of assets, which would not be hard, into a REIT.
“We are already builder, project manager and owner of the properties, so it just makes sense for us to put it into a property trust,”
Although Grollo said the plans are at preliminary stages, he hinted the trust could be run in house rather than externally.
“We are looking for people to run it,”
Grollo also could not reveal the properties likely to be offered but he said it would be high quality assets such as $110 million Media House in Melbourne, home to Fairfax’s The Age and Australian Financial Review.
The trust could also include Grocon’s 25% interest in the new Sydney CBD office development at 163 Castlereagh St. The 42-level tower is worth around $800 million.
Meanwhile Grollo is taking a conservative approach.
Grollo’s trust will be avoiding the pitfalls of yesteryear’s property trusts with high gearing.
“What we have planned will have minimal debt and be lowly geared,” he added.
“Things cannot go back to what they were in 2007, before the global financial crisis,”
Grollo’s proposed listing would inject life back into the A-REITs sector. He will join the likes of Investa, whose parent company Morgan Stanley has planned for $1 billion office REIT and Brookfield Multiplex with a $4 billion REIT.
Grollo will be the new kid on the block because both Investa and Brookfield Multiplex have had a past life as a publicly listed company before they were privatised.
Meanwhile any potential listings will have several hurdles to jump over.
Currently major A-REITs are trading at a discount to Net Tangible Assets compared to pre-GFC days when they were trading to big premiums to NTA.
UBS’ head of property Tim Church recently said this is one of the major barriers to floating a REIT because the market has not caught up to the value of property trusts, let alone value the trusts at a premium price.
Australian Property Journal
