Australian Unity Investments (AUI) is undertaking a $67 million capital raising that will be primarily used to fund the purchase of an expansion to the Waurn Ponds Shopping Centre in Geelong, Victoria, the flagship property in its Retail Property Fund (the Fund).
The expansion is being built on land adjacent to the existing shopping centre, which was purchased through a joint venture between Australian Unity and Coles in 2006 as part of a long-term strategy to improve the value of the centre.
The capital raised will allow the Fund to purchase the entire development from the joint venture upon completion of the expansion, which is expected to be in mid 2012. While the development is in progress, the funds will be used to reduce current gearing levels and effectively reduce the Fund’s borrowing costs.
The expansion will increase the size of the existing shopping centre, adding in excess of 50 new tenancies to create a 35,000m2 centre. 80 percent of the new development is already pre-committed and the present centre currently has more than 97 percent occupancy.
Existing investors in the Fund will be given the opportunity to participate in a limited priority rights offer to purchase one additional security for every two securities already held in the Fund at a 10 percent discount*.
Mr Mark Pratt, AUI’s general manager – property, mortgages and capital markets, said that the expansion of the Waurn Ponds Shopping Centre will bring a number of benefits to investors in the Fund including improving and enhancing the Fund’s main asset and providing greater income security.
“The new tenancies will further diversify the Fund’s overall tenant base, improve the lease expiry profile, offer more secure income and therefore help reduce income volatility across the Fund.
“The expanded shopping centre is well-positioned to service Greater Geelong’s fast-growing community, which is predicted by the City of Greater Geelong to grow by 37 percent over the next 20 years α.
“It should also result in the centre being classified as a “regional centre”, rather than the current “sub-regional centre”. As regional centres generally trade on lower capital rates, this in turn is anticipated to create higher capital value for investors.”
The offer opened to existing investors on 1 November 2010 and will close on 15 December 2010. Depending on availability, securities will be offered to other investors at a 10 percent discount to the daily price of the retail securities in the Fund. This public offer (if undertaken) will start on 16 December 2010. The Fund has a ‘Recommended (Upper End)’ rating by Lonsec^ which covers the rights issue, Wholesale units and Class A units.
The Fund consists of seven retail properties in Victoria, NSW, Queensland and WA, and is valued at more than $370 million (as at 30 September 2010).
04/11/2010
-oOo-
* The 10 percent discount applies to the security price as at 4 October 2010 which was $0.7909
α City of Greater Geelong Population Forecast (www.id.com.au/forecast/geelong)
^The Lonsec Limited (“Lonsec”) ABN 56 061 751 102 rating (assigned November 2010) presented in this document is limited to “General Advice” and based solely on consideration of the investment merits of the financial product(s). It is not a recommendation to purchase, sell or hold the relevant product(s), and you should seek independent financial advice before investing in this product(s). The rating is subject to change without notice and Lonsec assumes no obligation to update this document following publication. Lonsec receives a fee from the fund manager for rating the product(s) using comprehensive and objective criteria.
