Commonwealth Property announces largest single asset securities issue for Aurora Place
29 March 2001
Commonwealth Property today announced the largest single asset Commercial Mortgage Backed Securities (CMBS) issue in Australia for its investment fund, Commonwealth Property Investment Trust (CPIT).
Following settlement of CPIT's investment in Aurora Place, Commonwealth Property will raise A$150 million through a CMBS issue, rated Aaa/AAA by both Moody's and Fitch rating agencies.
Mr Peter Roberts, Head of Finance of Commonwealth Property, believes the CMBS issue will deliver value to CPIT investors and a debt maturity profile in line with the Fund's strategy and structure.
"Commonwealth Property employs a highly disciplined active management approach to fund debt raising, with a focus on utilising innovative capital management techniques," Mr Roberts said.
"Each fund has a specific strategy that includes how best to use debt funding to enhance investor returns."
"The CPIT program is an example of an innovative approach to achieve certainty at an optimal price while at the same time managing interest rate volatility," he said.
Commonwealth Property has significant experience in both bank debt and capital markets, managing the first unlisted property fund (CPF) to issue rated Medium Term Notes (MTNs).
"We have been assessing the CMBS product for some time and believed that CPIT would be well accepted by securities investors, being a premium asset and an appropriate fund investment structure," Mr Roberts said.
Submissions made to Commonwealth Property for the debt funding for Aurora Place were very competitive, confirming its process of seeking submissions from a number of financiers to provide transparency and benefits to unitholders.
ABN AMRO was appointed for the fund raising and according to ABN AMRO's Director, Financial Markets Division, Mr Tom Roche, the financing arrangements were structured to capitalise on the quality of the property and the strength of its tenancy commitments.
"This allowed us to minimise the cost of the debt funding," Mr Roche said.
"Our financing package gives CPIT certainty in the cost and availability of funding, assisting them in providing investors with an optimum return on investment, while allowing us to obtain the most effective source of funding.
"As a major tenant of this premier office building, we have a close appreciation of the quality of this asset," he added.
CPIT's Fund Manager, Mr Roger Parker commented that while the quality of the property was important, successful funds management was equally about establishing appropriate investment structures and aligning investors' interests with those of their fund managers.
The establishment of CPIT, an unlisted property fund that has a performance based fee and clear exit strategy, was consistent with Commonwealth Property's philosophy and business model of alignment of investor interest and management objectives.
The investment in Aurora Place, which comprises approximately 47,500 square metres of net lettable office accommodation with major tenants including ABN AMRO, Minter Ellison, Challenger and State Street, was secured through CPIT on 13 February 2001.
The gearing ratio will be approximately 32 per cent of the gross assets of the Fund. ABN AMRO plans to roadshow the issue with Commonwealth Property this week.