AUI is seeking to merge its Australian Unity Fifth Commercial Trust and its Australian Unity Office Property Fund.
Australian Unity Investments (AUI) is seeking approval from investors in the Australian Unity Fifth Commercial Trust (FCT) to merge the trust with the larger, more diversified, Australian Unity Office Property Fund (OPF).
Investors in FCT will be eligible to vote on the Proposal via proxy or by attending a general meeting of investors on Wednesday 11 December 2013, in Melbourne.
OPF is an unlisted property fund, which owns eight quality office buildings in some of Australia’s major centres, with a forecast total asset value of approximately $366 million (30 June 2014).
FCT is a fixed term trust due to terminate in 2015. By making the Proposal now, AUI is seeking to maximise the value of FCT’s remaining properties at 5 Eden Park, North Ryde NSW and 30 Pirie Street, Adelaide SA (already 50% owned by OPF). The Proposal allows FCT to effectively transfer its interests in both properties to OPF at an agreed valuation; which removes the reliance on the risks of a sale process, and involves no selling costs.
Mark Pratt, General Manager Australian Unity real estate investment, said the merger would provide investors with a cost and tax effective option to continue their investment in commercial property.
“We believe the proposal is in the best interests of investors in FCT and will deliver a number of key benefits.
“OPF is forecast to provide higher distribution returns than those forecast for FCT, has greater diversification than FCT, and intends to continue providing regular capped withdrawal opportunities to investors.
“Investors will have the ability to continue their exposure to the property market via an investment in the OPF – a diversified fund open to new investment that has been operating for more than eight years.
“The Proposal ensures certainty of transaction values for the remaining properties in the Trust, no selling costs and the opportunity to consolidate the joint ownership of 30 Pirie Street, Adelaide SA, providing greater control over its asset management strategy.”
Mr Pratt said if the merger was approved, FCT investors would pay lower management fees, as the management fees for the OPF are lower.
“A number of investors in FCT have indicated to us they would like to maintain an investment in the Australian property market beyond FCT’s scheduled termination in May 2015.
“If investors vote in favour of the Proposal, their investment will transfer to the OPF with the dollar value of their investment remaining unchanged at the implementation date,” Mr Pratt said.
If the merger is approved, it provides investors in FCT the opportunity to realise all or part of the investment through an initial $15 million capped withdrawal offer equating to approximately 25 per cent of FCT’s net asset value. They may also have the opportunity to defer any capital gains tax (CGT) on their investment by opting for scrip for scrip rollover relief.
“It is also our recent practice, and future intention, to provide investors in the OPF with the flexibility to withdraw through half-yearly capped withdrawal offers,” Mr Pratt said
Mr Pratt said AUI is experienced in successfully bringing together investment vehicles. Earlier this year it merged the Australian Unity Second Industrial Trust with OPF following strong support from investors, and in 2009 it converted five retail property syndicates and trusts into a single fund, the Australian Unity Retail Property Fund.
“We believe a merger would broaden FCT investors’ diversification of properties by tenant and geography. As the OPF is open to new investment, it can also raise capital and acquire or dispose of assets in order to take advantage of market opportunities in line with Australian Unity’s active asset management,” he said.