Australian Unity bolsters its Defence against circling suiters

Australian Unity bolsters its Defence against circling suiters

After being hit with a string of buyout proposals, Australian Unity Office Fund’s (AOF) board has floated a potential merger with the Australian Unity Diversified Property Fund.

The merger option is the outcome of a strategic review the ASX-listed property trust began in February as it searches for ways to bolster its flagging stock price. In a strategic assessment of the funds positioning and priorities, the board believes that a merger between AOF and the Australian Unity Diversified Property Fund (DPF) has financial and strategic merit.

Australian Unity Investment Real Estate Limited (AUIREL) chairman Peter Day said the potential merger is a key initiative to deliver on its refined strategy. “The board looks forward to working constructively with Australian Unity Property Limited (AUPL), the responsible entity of DPF, to explore a potential merger of AOF and DPF,” he said.

A merger between the two funds would create a diversified portfolio of 18 assets with a roughly $1.2 billion value. The resulting $1.2 billion portfolio would be publicly listed and weighted to about 70 per cent to office and 27 per cent to convenience and infrastructure retail assets. The remainder would comprise industrial assets. The listed office fund aims to keep its gearing below 40 per cent.

The portfolio would then have an occupancy of approximately 96 per cent and a weighted average lease expiry of approximately 4.8 years. The office fund has already been pursuing plans to expand the capacity of its portfolio, including through a development at 2 Valentine Avenue in Parramatta, in Sydney’s west.

The listed office fund had approached its unlisted sister with the plan. For the merger to go ahead, due diligence on both sides would need to be completed, along with financing arrangements, a scheme implementation agreement and unitholder approval.

The merger plan follows several years of turbulence at the fund. In late 2019, a joint takeover offer from Charter Hall and Abacus was effectively torpedoed by a minority of investors including the Scanlon family-backed investment house, Hume Partners. Then early last year US investment giant Starwood Capital returned for a second tilt at the property trust, more than a year after its first buy-out effort. Starwood’s second bid also came to naught. Since then Hume Partners has stepped up its stake in the property trust, to hold 19.9 per cent. Singaporean fund manager Keppel Capital has become a major shareholder as well.

On Wednesday, the listed fund updated its full-year 2021 earnings guidance range between 18.5¢ and 18.7¢ cents per unit, reflecting the top end of the previously provided guidance range of 18.3¢ and 18.7¢ cents per unit. The revised guidance reflects the strong collections and leasing outcomes achieved over the past year, it said.

As well, Australian Unity-run office fund has appointed Nikki Panagopoulos as its fund manager. AOF has announced an update to its FY21 funds from operation guidance range to 18.5–18.7 cents per unit, up from 18.3-18.7 cents per unit.

AOF fund manager Nikki Panagopoulos said they were pleased to confirm the upper end of the FY21 guidance range, which reflected its strong collections and positive lending outcomes. “Our focus into FY22 will include delivering on AOF’s refined strategy and executing on our active asset management and refurbishment programs, enabling AOF’s assets to continue to meet tenant requirements,” she said.

Why such move to fend off buyers? Follow the Australian Unity story here;


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