Australian Unity is finalising a proposal to list the Australian Unity Office Property Fund on the Australian Securities Exchange (ASX).
The Fund is an unlisted property fund, established in 2005, which owns a portfolio of eight office assets in New South Wales, Victoria, Australian Capital Territory, South Australia and Queensland, with assets valued at $391 million.
Mark Pratt, general manager of Australian Unity Real Estate Investment, said Australian Unity was well positioned to progress the listing.
"We believe an ASX listing is in the best interests of existing investors as it will provide access to additional equity for the sustainable growth of the Fund and liquidity to those investors seeking to withdraw.
"The Australian Unity brand is already well known and respected for its expertise and track record in unlisted property management and we believe this will transfer well to the listed environment.
"This will be the first A-REIT to list on the ASX this calendar year and we expect there will be strong interest from investors."
Mr Pratt said institutional marketing will commence shortly. Australian Unity's joint lead managers for the IPO are Credit Suisse (Australia) Limited, UBS AG Australia Branch and National Australia Bank Limited.
The new listed fund will be named the Australian Unity Office Fund, and the IPO will seek to raise up to $155 million.
As a result of the IPO, the Fund will be able to reduce its gearing to approximately 30 per cent upon listing, terminate interest rate swaps, facilitate a significant withdrawal offer to existing investors and pay for transaction costs.
Australian Unity corporate entities and funds managed by Australian Unity subsidiaries are expected to have an investment in the listed Fund of up to 15 per cent at allotment.
As at 30 April 2016, the Fund's occupancy was 96.5 per cent (by net lettable area) and its weighted average lease expiry 4.7 years (by gross property income).
Recent positive leasing for the Fund includes a six-year lease renewal with the NSW State Government at 10 Valentine Avenue, Parramatta. This renewal extended the existing lease term to 30 June 2022 and had a positive impact on the property's independent valuation. As at 30 April 2016, the property's value increased by $8.1 million from its previous book value, or approximately 13.1 per cent, to $69.5 million. The NSW State Government occupies all of the property's office space.
An Explanatory Memorandum and Notice of Meeting is expected to be sent to investors in the Fund after the institutional marketing process has concluded, and an underwriting agreement signed. This is currently expected to occur in late May 2016.
Should the resolutions be approved by investors and the IPO completed successfully, the Fund will have built upon its already strong investment fundamentals, including:
- An exposure to an office portfolio diversified by geography, tenants and lease expiry profile, independently valued at approximately $391 million;
- Income returns underpinned by leases to investment grade tenants, with approximately 50 per cent of the portfolio leased to Telstra, the NSW Government and GE Capital Finance;
- A 4.7 year weighted average lease expiry and 96.5 per cent portfolio occupancy;
- Forecast distribution yield of 7.4 per cent for the one year period to 30 June 2017 growing to 7.8 per cent annualised for the six months ending 31 December 2017*;
- Gearing of approximately 30 per cent upon listing;
- The potential for income and capital growth, with the majority of leases containing fixed rental reviews; and
- Access to the property management expertise and experience of the Australian Unity Group, which has an established real estate platform and a proven track record in funds and investment management.
"If investors pass all resolutions set out in the Notice of Meeting, we anticipate the Fund will be listed around 30 June 2016. The withdrawal offer made available to existing investors is expected to be paid shortly after listing," said Mr Pratt.
About Australian Unity
Australian Unity is a national healthcare, financial services, and independent and assisted living organisation providing services to almost one million Australians, including around 300,000 members nationwide. Australian Unity’s history as a trusted mutual organisation dates back 175 years. It has grown organically—by continually evolving and providing the services and products needed by the communities it serves—as well as through successful strategic mergers and diversification into new business activities.
* The timing and magnitude of actual events might differ from those assumed in preparing the forecast financial information, and that any deviation in the assumptions on which the forecast financial information is based may have a material positive or negative effect on the Fund’s financial performance or financial position. There can be no guarantee or assurance that the forecast financial information will be achieved. The forecast financial information should be considered in conjunction with the general and specific assumptions, sensitivities and risk factors as set out in the PDS once available at www.australianunityofficefund.com.au.
Australian Unity Investment Real Estate Limited ABN 86 606 414 368 is the issuer of the Product Disclosure Statement (PDS). Australian Unity Funds Management Limited ABN 60 071 497 115 is the responsible entity of the Fund and the issuer of the Explanatory Memorandum and Withdrawal Booklet. The information in this media release is general information only and is not based on the objectives, financial situation or needs or any particular investor. Investors should consider the PDS, the Notice of Meeting, the Explanatory Memorandum and the Withdrawal Booklet (as relevant) before deciding whether to continue to hold units, acquire additional units in connection with the IPO, or to participate in the withdrawal offer as part of the IPO. The PDS will be made available from the Fund’s website at www.australianunityofficefund.com.au once lodged with ASIC. We recommend you seek your own professional advice when the Proposal is issued.