Telstra flags $1.5b property trust play

Telstra flags $1.5b property trust play

24 May 2019

Telstra Corporation is seeking investors in a new unlisted property trust in a move that could net the telecommunications company up to $1.5 billion, the AFR reports.

Up for grabs is a 49 per cent stake in a proposed new trust that would be home to a network of telecommunication exchange properties currently owned by Telstra.

The 37 “strategic sites” are located in Australian capital cities and large populations hubs.

Investment bank UBS has started approaching Australian and offshore real estate investors on Telstra’s behalf, to kick start what’s expected to be a keenly contested auction.

Telstra would reportedly lease the property portfolio back from the trust and maintain a majority shareholding in the new investment vehicle.

The portfolio would have a 21-year weighted average lease term, and Telstra would be responsible for all outgoings, repairs and maintenance, and capital expenditure during the term of the lease, the AFR said.

There would also be multiple options for lease extensions to accommodate Telstra’s ongoing requirements.

It is understood the stake is pitched at Australian real estate investors including Charter Hall Group and ISPT, as well as superannuation funds with direct property investment teams and offshore strategic and financial investors.

Analysts reckon the stake could be worth as much as $1.5 billion.

The plan forms part of Telstra chief executive Andy Penn’s goal to offload assets to raise $2 billion by the end of 2020.

While one potential bidder said it was way too early to ascribe a value to the 49 per cent stake, Telstra would be well on the way to achieving the $2 billion target if it can get anywhere near $1.5 billion for the property play.

Proceeds from divestments will likely reassure Telstra shareholders that its dividends won’t be cut (or at least not by much) in the coming years as the telco’s margins and profits are squeezed by the NBN and competition.