Westpac sells control of $400m property fund

WESTPAC has sold the management of its diversified property fund to Australian Unity Investments as part of the bank's review of its $1.5 billion real estate funds management sector.

By InvestSMART · 21 Sep 2010

By InvestSMART ·
21 Sep 2010

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WESTPAC has sold the management of its diversified property fund to Australian Unity Investments as part of the bank's review of its $1.5 billion real estate funds management sector.

No price was disclosed but under the deal Australian Unity will underwrite up to $10 million of a proposed $40 million rights issue that will be offered to existing stakeholders in the Westpac fund, which has $400 million in assets under management.

The deal will increase Australian Unity Investments' funds under management to about $1.7 billion. Its other funds are invested in healthcare and retail-specific assets.

The Westpac fund is an unlisted vehicle that owns 13 predominantly industrial and office assets, including a $32 million office at Parramatta, leased to ANZ, and an IGA distribution centre at Balcatta, Perth.

In February, Westpac said it was reviewing its property funds management platform, saying the strategy "includes investigating potential value-enhancing opportunities proposed by third parties".

Since then the bank has sold its Westpac Office Trust to Mirvac and will continue to review other assets in the property funds management division.

Rob Whitfield, the group executive for Westpac's institutional bank, said the transaction should prove attractive to unit holders because of the opportunity for liquidity and the lower refinancing risk for the Westpac fund.

David Bryant, the head of Australian Unity, said the deal would also establish liquidity in the fund via a series of three $10 million withdrawal offers during 2010-11.

Mr Bryant said investors were moving back to the unlisted, direct property funds management sector, which has proved less volatile over the past two years compared with listed real estate investment trusts.

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Frequently Asked Questions about this Article…

Why did Westpac sell management of its $400 million property fund to Australian Unity Investments?

Westpac sold the management as part of a broader review of its $1.5 billion real estate funds management platform. The bank has been investigating value-enhancing opportunities and decided to transfer management to Australian Unity, a move Westpac says should offer unit holders more liquidity and lower refinancing risk.

What are the key terms of the deal between Westpac and Australian Unity Investments?

No purchase price was disclosed. Under the agreement Australian Unity will underwrite up to $10 million of a proposed $40 million rights issue offered to existing stakeholders in the Westpac fund. The transaction will also increase Australian Unity Investments' funds under management to about $1.7 billion.

How will the proposed $40 million rights issue and underwriting affect existing unit holders?

Existing unit holders will be offered the proposed $40 million rights issue, and Australian Unity will underwrite up to $10 million of it. Westpac and Australian Unity say the deal creates opportunities for liquidity for unit holders and helps lower refinancing risk for the fund.

What assets are held in the Westpac diversified property fund?

The unlisted Westpac fund owns 13 predominantly industrial and office assets, including a $32 million office in Parramatta that is leased to ANZ and an IGA distribution centre in Balcatta, Perth. The fund has about $400 million in assets under management.

How will this acquisition change Australian Unity Investments' property exposure and funds under management?

The deal will lift Australian Unity Investments' funds under management to roughly $1.7 billion. Australian Unity's other funds are invested in healthcare and retail-specific property assets, so the transaction broadens its diversified property exposure.

Has Westpac made other changes to its property funds management business recently?

Yes. In addition to this sale, Westpac has sold its Westpac Office Trust to Mirvac and has said it will continue to review other assets within its property funds management division as part of the broader platform review.

Will the deal provide immediate liquidity options for investors in the Westpac fund?

According to Australian Unity's head, David Bryant, the deal will establish liquidity via a series of three $10 million withdrawal offers during 2010–11, giving investors staged opportunities to access funds over that period.

Why are some investors returning to unlisted, direct property funds instead of listed real estate trusts?

David Bryant said investors have been moving back to the unlisted, direct property funds management sector because it has proved less volatile over the past two years compared with listed real estate investment trusts, offering potentially steadier exposure to property assets.