Commonwealth Property Investment Trust acquisition of Aurora Place, Sydney
28 September 2000
Commonwealth Property today announced it has entered into unconditional contracts to acquire the ownership interests holding Aurora Place, 88 Phillip Street, Sydney. The acquisition price of $485m is subject to adjustments on settlement with final settlement of the investment due to occur mid January 2001.
Quentin Shaw, Head of Capital Transactions at Commonwealth Property, negotiated the deal on behalf of a new wholesale investment structure developed in conjunction with a number of large Australian investors and managed by Commonwealth Property.
The acquisition will be made by the Commonwealth Property Investment Trust (CPIT), which has eight Australian investors, principally superannuation funds. CPIT is a limited life Fund with a performance based fee and clear exit strategy.
"The Fund's concept is consistent with many of the Funds managed by Commonwealth Property, that is, a limited life, clear exit strategy and performance-based fee," said Bob Kelly, Head of Funds Management at Commonwealth Property.
"We believe this is the type of investment structure which many informed investors will support in the future because there is true alignment of interests between Investor and the Manager. The Manager's performance fee is only paid on sale of the property and is based on a true realisation of the asset, not a valuation," he added.
CPIT will be capitalised with $350 million of equity and the balance to be funded by debt.
The structure of this Fund is similar to the structure which Commonwealth Property has successfully implemented for the Commonwealth Property Fund (CPF) (formerly CFM Property Fund), which has over the past three years been the top performing large scale direct Fund in Australia according to Bob Kelly. The same aligned structure has been the key to the successful launch this year of the Commonwealth Property Hotel Fund (CPHF) and the restructuring of the Private Property Syndicate (PPS) (formally Schroders Private Property Syndicate).
According to Bob Kelly the acquisition is not only one of a superb building but also about investment structure and investor interests.
Roger Parker has been appointed the Fund Manager of CPIT, having had extensive experience of asset and property management both in the UK and Australia. Roger Parker said that CPIT provides investors with a unique opportunity to invest in the newest premium grade asset in the financial core of the Sydney CBD.
Aurora Place is already more than 80% leased and there is strong interest in the remaining vacant areas. Aurora Place comprises approximately 47,500 square metres of office accommodation, with ABN Amro and Minter Ellison to occupy approximately 35% and 30% respectively. Other tenants include Challenger International, State Street and The Executive Centre.
General Manager of Commonwealth Property Geoff McWilliam commented, "This transaction represents a significant milestone for Commonwealth Property. It is a large scale initiative focused around a properly aligned investment structure".
"The transaction is the largest purchase ever of a single property asset in Australia by a single entity and has occurred in a year during which the listed and direct trust market has struggled to raise capital," he added.