This article is from the Australian Property Journal archive
PELORUS Property Group has proposed to merge its unlisted funds and related entities to create a larger group that will target more distressed assets.
Under the proposal, Pelorus will issue scrip at 42 cents per share to acquire all the units, not currently owned by the group, in the Bakehouse Quarter Fund and the Pelorus Penrith Fund No. 2.
In addition Pelorus would issue scrip to acquire the entity that owns 120 Mulgoa Rd Penrith, over which the Pelorus Penrith Fund No 2 has security.
If successful, the merged group will increase its gross assets from $42 million to $220 million and net tangible assets from $38 million to $127 million whilst maintaining a gearing of 38% or $83.4 million.
In addition, the portfolio of four properties in the funds will provide an addition net income of $10.5 million per annum.
The major asset of the merged group will be the Bakehouse Quarter in North Strathfield. The Bakehouse Quarter is an Urban Business Precinct on seven hectares of land and includes the old Arnott’s Biscuit Factory.
Conversion of the factory buildings and development of new buildings has so far delivered 20,000 sqm of office space, a dozen restaurants and the 3,500 sqm AMF Bowling Centre, plus a Fitness First Gym, an Aldi Supermarket, a Harris Farm Market and a range of other amenities including medical centres and a pharmacy.
A multi deck carpark and further commercial space are under construction whilst a hotel and two further office buildings are currently being designed.
Pelorus’ chairman Seph Glew said the directors believe that the expanded balance sheet and increased shareholder base resulting from the merger will better position the group to take advantage of current market conditions.
“Pelorus continues to focus on distressed asset opportunities. Pelorus directors believe the merger proposal will enable the company to more aggressively pursue opportunities of this nature.
“Our emphasis on asset opportunities will have the effect of holding back our reportable earnings in the short term but we know from experience that the gains from a successful turnaround can be extraordinary in the longer term,” he added.
The merger does not include the Pelorus Storage Fund and the property currently being developed by the group at 850 Woodville Rd Villawood, but Glew did not rule out a potential merger in the future.
Meanwhile, Glew said whilst the property portfolio will underpin the group’s 2009 earnings, market conditions and make it difficult to forecast increase in earnings above the 2008 year, which is expected to be in the range of $4.8 to $5.2 million.
Pelorus shares closed unchanged at 40 cents.
Australian Property Journal
