Late Friday, Multiplex Group announced its intention to launch a $640 million office fund with the potential to grow to a $1.6 billion office vehicle within the next two years.
Multiplex said the new fund to be called Multiplex Acumen Prime Property Fund is expected to be listed on the Australian Stock Exchange subject to a successful capital raising by August.
The new trust will assist Multiplex eradicating itself of debt.
Managing director of Multiplex Capital, Ian O’Toole said the intention is to establish a new fund comprising a portfolio of prime CBD office assets in Sydney, Perth and Melbourne.
“The initiative represents the next phase of the Group’s strategy outlined at the February 2006 interim results to pursue growth of its successful third party funds management business,” he added.
O’Toole said Multiplex Property Trust will become a cornerstone investor in the new vehicle “consistent with the Group’s philosophy to align the interests of the Group with external investors”.
All the properties being bought by the new fund are currently are currently controlled by Multiplex.
The properties include 100% of the new American Express building on Sydney’s King Street Wharf, currently under development by Multiplex Developments and due for completion in January 2008 and will be sold to the new fund for $123.5 million; 50% of Ernst & Young Centre, World Square, Sydney for $256.25 million; 25% of Southern Cross, Melbourne for $130 million; 100% of Defence Plaza, Melbourne for $67 million; and a portfolio of Listed Property Trust securities with a value of around $63 million.
A further $ 1 billion worth of properties that may eventually find their way to the find are Site C Latitude, Sydney – NLA approximately; Stage 4B, King Street Wharf, Sydney; Southern Cross West Site, Melbourne; Bishops See, Perth; City Square, Perth.
O’Toole said features of the new fund are an initial forecast distribution yield circa 7.75%;
100% tax-advantaged distributions for two years; weighted average lease duration (by value) 10.3 years and properties that have a 97% occupancy.
"This is an exciting opportunity for the Group and follows on from the successful Multiplex New Zealand Property Fund. It is a clear demonstration of the unique position the Group enjoys in accessing new product through the strong pipeline in the Group’s Development business, with the majority of the fund’s proposed portfolio having been, or currently being, developed by Multiplex."
O’Toole added that Multiplex Limited benefits from attractive up-front establishment and ongoing management fees in the form of both base and potential performance fees.
He said on completion of the proposed capital raising, the net proceeds received by Multiplex Property Trust will allow it to reduce existing borrowings and will result in greater balance sheet flexibility.
Multiplex SITES are not expected to be impacted as the proceeds are in part being utilised to repay senior debt, therefore the Trust’s capacity to pay the quarterly SITES coupon will not be impacted.
Multiplex Group is working with National Australia Bank Limited and Australia & New Zealand Banking Group Limited in respect to both funding and distribution, with NAB being Arranger to the Fund.
By Ted McDonnell
