Archive | Commonwealth Property Fund

World property T30Sept14 – CFS Retail renamed

CFS Retail to become Novion Property

CFS Retail Property Trust Group will change its name to Novion Property Group on 3 November, following its internalisation. Securityholders will be asked to approve the name change of the listed company within the stapled group, CFX Co Ltd, to Novion Ltd at the annual meeting on 31 October.

Former Kiwi Income Property Trust chief executive Angus McNaughton, who’s now managing director & chief executive of CFS Retail, said yesterday: “The change to Novion Property Group represented the group’s evolution as part of our recent internalisation, with Novion being derived from the Latin word for new and the word ‘on’, reflecting across our group, the passion of our people and our ongoing desire to look for new ideas and improved solutions as we strive to create better retail property in Australia.

“Although the group will have a new name, our centres will retain their strong individual identities which reflect our bespoke approach to retail.”

The group has $A14.2 billion of retail assets under management, including $A8.9 billion held on its own balance sheet.

The Commonwealth Bank of Australia proposed internalising management of 3 of its property funds last year – CFS Retail, Kiwi Income and the $A3.9 billion Commonwealth Property Office Fund.

A joint venture between Dexus Property Group & the Canada Pension Plan Investment Board completed its takeover of the office fund in April.

Kiwi Income internalised management in December and is aiming to put a corporatisation proposal to unitholders to take effect following the conversion of its mandatory convertible notes on 20 December.

Attribution: Commonwealth Property Fund
Regular leads: Europe Real Estate, Mingtiandi, Planetizen, World Property Channel

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World property M31Mar14 – Canadians buy into Chinese housing, GPT buys half a mall, CFS Retail internalisation done, Westfield advances to split, shift in debt currency, second 360 Capital listing

Canadian pension fund enters housing joint venture with China Vanke
GPT fund buys half of Melbourne shopping centre from Canadian fund
CFS Retail completes internalisation, Dexus takeover of office fund nears completion
Westfield organises funding for new group split
A-Reit shifts funds from euro to yen
Newly listed 360 Capital to list office fund separately

Canadian pension fund enters housing joint venture with China Vanke

The Canada Pension Plan Investment Board has formed a new venture with China’s largest residential developer, China Vanke Co Ltd, to invest $US250 million in the Chinese residential market over time.

The Canadian board’s senior vice-president of real estate investments, Graeme Eadie, said on Tuesday the venture would focus on new residential development projects in large cities where incomes are rising and economic fundamentals are strong.

“It is expected that these factors will provide significant demand for middle-income housing. To seed the venture, the board & Vanke are investing in a project in Qingdao, Shandong Province.”

China Vanke chairman Wang Shi.

China Vanke chairman Wang Shi.

Vanke was founded in 1984 by chairman Wang Shi, had revenue of $US22 billion in 2013 and has developments in 65 Chinese cities & 4 cities in other countries. It’s developed over 500,000 residential units and provides property management services to over 400 residential communities.

At 31 December 2013, the Canadian board had $C23.4 billion invested in Asia, representing 11.6% of its total portfolio, C$4.2 billion of the Asian investment is in real estate.

China Vanke entered the US property market in February 2013 when it signed a joint venture with Tishman Speyer LP, of New York, to develop 655 apartments in 2 joined towers in San Francisco.

Tishman Speyer has been a major commercial property developer in China. Its latest joint venture there, signed last September, is with Shanghai Lujiazui Group for 300,000m² of mixed-use development in the New Bund, south of the Shanghai Expo site in Pudong, featuring offices, upmarket retail & waterfront apartments.

China Vanke said on 4 March the China Securities Regulatory Commission had approved its request to transfer its listing of B shares in Shenzhen into H shares listed in Hong Kong. China Vanke will retain a listing for its A shares in Shenzhen.

Canada Pension Plan Investment Board
China Vanke
Tishman Speyer

GPT fund buys half of Melbourne shopping centre from Canadian fund

Australian property group GPT said on Thursday the GPT Wholesale Shopping Centre Fund had bought a 50% interest in the Northland Shopping Centre in Melbourne from the Canada Pension Plan Investment Board for $A496 million.

GPT chief executive & managing director Michael Cameron said the transaction represented an initial yield of 6.1% and a core capitalisation rate of 5.8%. It’s due to settle on Wednesday 30 April.

The super-regional centre 11km north of Melbourne’s cbd is co-owned & managed by CFS Retail Property Trust Group, which GPT unsuccessfully tried to take over (see next item). It has 91,536m² gross retail floor area, 3300m² office, 315 tenants, 4800 parking spaces, annual sales turnover of $A493 million

Link: GPT

CFS Retail completes internalisation, Dexus takeover of office fund nears completion

The Commonwealth Bank of Australia-controlled CFS Retail Property Trust completed its management internalisation last Monday, 24 March.

It was one of 3 property asset disposals the bank proposed last July. The first to be implemented was internalisation of Kiwi Income Property Trust’s management, which unitholders approved in December.

The second was the divestment of the $A3.9 billion Commonwealth Property Office Fund. The bank also proposed internalising this fund’s management last July, but Dexus Property Group swooped the next day, acquiring 14.9% of it by way of a forward contract, and thereby preventing anyone else from going to compulsory acquisition.

Another big ASX-listed property group, GPT, tried to buy the Commonwealth fund but gave up at the end of January. On 3 March, Dexus, partnered by the Canada Pension Plan Investment Board, said it had over 90%. Its takeover will be completed on Friday 4 April.

The retail property trust’s internalisation included acquiring the bank’s retail property asset management business and the relevant entities to begin the investment management of a number of wholesale property funds.

The new-look trust will manage $A13.9 billion of assets, and has 28 directly owned retail assets, 15 strategic partners & 5000 retailers.

Former Kiwi Income Property Trust chief executive Angus McNaughton, who’s been Colonial’s property managing director, has become chief executive & managing director of the internalised entity.

Mr McNaughton said the 28 retail assets would remain the revenue driver: “We will maintain our existing focus on the intensive asset management of our directly owned shopping centres. This includes the redevelopment & strategic remixing of our assets to create a compelling retail offer, driving shopper traffic & sales.

“Internalisation will allow further enhancements to our strategy. A strategic partnerships business will be added to the trust, making our offer complete through the addition of wholesale property funds & mandates, and retail property asset management.”

Link: Colonial First State Global Asset Management

Westfield organises funding for new group split

The Westfield Group advanced its newest restructure this week, saying on Wednesday it had entered into funding commitments for $A22 billion of financing facilities which are required for the proposal to establish Westfield Corp and Scentre Group.

Westfield announced the proposal to rearrange the group & the Westfield Retail Trust in December. Scentre Group will own the combined Australia & New Zealand business and will be internally managed. The rest of the business – malls in the US, UK, Europe & Brazil – will become Westfield Corp.

Subject to court approval, Westfield will dispatch the securityholder booklet, including the independent expert’s report, in late April. The meeting to consider the proposal will be held on Thursday 29 May.

This week’s announcement followed the completion last week of the $US800 million acquisition of the remaining 50% of Westfield World Trade Centre and the conditional agreement to sell 3 assets in the UK for $A1.1 billion.

The $A22 billion of funding commitments includes $A14 billion of 2-year bridge facilities, with an option to extend by a further 12 months, and $A8 billion of 2- to 6-year bank facilities.

The present group & trust manage $A70 billion of assets in 90 malls containing 20,500 retail outlets.

Link: Westfield corporate

Earlier story, 8 December 2013: Westfield restructure up for approval next May

A-Reit shifts funds from euro to yen

Ascendas Funds Management (S) Ltd, the manager of Singapore’s A-Reit (the Ascendas Real Estate Investment Trust, is moving $S395 million (€197.5 million) out of commercial mortgage-backed securities denominated in euros into floating rate yen notes.

A-Reit’s trustee has issued ¥5 billion of notes due in March 2021 to institutional & sophisticated investors. A swap agreement translates the proceeds into $S62.31 million.

Newly listed 360 Capital to list office fund separately

Australian syndicate manager 360 Capital Group Ltd continues to reshape the entities its investors are involved in, as it takes the 360 Capital Office Fund to an ASX listing 6 months after listing the parent group.

Former James Fielding Ltd executive Tony Pitt formed 360 Capital in 2006 to invest in direct property assets, property securities & various corporate real estate acquisitions on a private equity basis. The group expanded in 2010, when it bought the Becton residential & retirement village development group’s $A1 billion Becton Investment Management Ltd.

Last October, it obtained a backdoor listing on the ASX through the struggling Trafalgar Corporate Group. When it listed, 360 Capital Group managed 10 investment funds & trusts holding 28 industrial, office & retail assets valued at $A860 million on behalf of over 8500 investors. It also held $A91 million in co-investments in its managed funds and 2 direct assets valued at $A49 million.

360 Capital RE Ltd, the responsible entity for the 360 Capital Office Fund, said on Wednesday it had completed the institutional capital-raising component of the office fund’s fully underwritten $A155 million recapitalisation, restructure & listing proposal and trading in the new units was expected to open on Thursday 24 April.

It has an $A235 million portfolio of 4 assets, 99.6% leased, 36.5% gearing, distributions tax-deferred at about 65% and reflecting an 8.5% distribution yield on the $A2 issue price.

Link: Capital Group

Attribution: Canada Pension Plan board, China Vanke, Tishman Speyer, GPT, CFS, Dexus, Westfield, A-Reit, 360 Capital

Regular leads: Europe Real Estate, Mingtiandi, Planetizen, World Property Channel

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World property W5Feb14 – Dexus unconditional

Dexus unconditional on revised Commonwealth offer

Dexus Property Group, partnered by the Canada Pension Plan Investment Board, appears to have won the fight for the Commonwealth Property Office Fund.

GPT’s offer for Commonwealth lapsed on 24 January and, on 29 January, the Dexus partnership declared its offer unconditional. It was also extended to Friday 14 February.

Commonwealth’s directors once again recommended acceptance, in the absence of a superior offer.

Dexus and the Canadian fund gave notice on 14 January that they controlled 25.45% of the Commonwealth fund. The joint venture offered Commonwealth investors a varied bid on 10 January, increasing the cash component and reducing the Dexus securities, but leaving both options on the table: A77.45c cash plus 0.4516 of a Dexus security, or A84.96c cash plus 0.3801 of a Dexus security for every Commonwealth unit.

Attribution: Commwealth Property, Dexus, GPT

Regular leads: Europe Real Estate, Mingtiandi, Planetizen, World Property Channel

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World property W18Dec13 – Dexus gets upper hand, Chinese fund buys US homes, Perth transformation

Dexus gets upper hand in fight for Commonwealth office fund
Grand China Fund swoops on 3000 US apartments
Contractors chosen for last stage of Perth transformation

Dexus gets upper hand in fight for Commonwealth office fund

The see-saw battle for the Commonwealth Property Office Fund – between Dexus Property Group, partnered by the Canada Pension Plan Investment Board, and GPT – bounced back in Dexus’ favour at the end of last week.

The Commonwealth Bank of Australia said in July it would exit 3 funds – Kiwi Income Property Trust in New Zealand (the management company & an 8.6% stake), the Commonwealth Property Office Fund and CFS Retail Property Trust Group in Australia.

The bank handed over management of Kiwi Income to a trust-owned management company on Friday after overwhelming approval by unitholders on Thursday, and said yesterday it had appointed Goldman Sachs to sell down its unitholding in the trust.

Dexus acquired 14.9% of the Commonwealth Property Office Fund by way of a forward contract the day after the bank said it was looking at internalising management. Dexus’ original offer was rejected after the fund increased its NTA, resulting in a revised $A2.83 billion offer.

Commonwealth’s board was set to accept that offer in late November, when GPT entered the fray with an $A3 billion offer (in a couple of earlier stories I had it at $A4 billion). Dexus said last Thursday its offer was worth A3.3c/security more than GPT’s, and on Friday Dexus made an $A41 million offer for the Commonwealth fund’s management rights. In addition, Dexus can move to compulsory acquisition but GPT can’t, blocked by the 14.9% Dexus stake. GPT holds 8% of Commonwealth.

Grand China Fund swoops on 3000 US apartments

New Zealand homebuyers complain about Chinese investors constantly outbidding them at auctions, bringing on the clamour to close the market to non-residents.

But investment in New Zealand is a tiny portion of the wave of Chinese money flooding into real estate markets around the world. Last Tuesday, the Grand China Real Estate Fund, set up to invest in the domestic market, settled on a US residential purchase: 2600 apartments in 9 housing estates. It had earlier bought 400 apartments in Atlanta & Houston.

The private equity fund’s chairman, Dr Zhang Mingeng, who’s also chairman of the China Real Estate Fund Association, outlined the investment strategy in a presentation last year, saying the fund would use 40% Chinese domestic money & 40% Chinese money held offshore, both through limited partnerships, and 20% from a local partner.

In June, China Today said the Grand China Fund was the first Renminbi-denominated real estate fund approved by the China National Enterprise Development & Reform Commission. The interest of private investors in offshore markets grew steadily after a 2006 law change supported the establishment of private real estate investment funds, but has accelerated in the last 2 years, particularly since rules for investment in domestic housing were tightened this year.

Links: Want China Times (Taiwan), Chinese private equity firms make major investments in US
Grand China Fund 2012 US investment presentation
China Today 17 June 2013, Chinese capital enters US commercial property market

Contractors chosen for last stage of Perth transformation

West Australian Planning Minister John Day named a 50:50 joint venture between Leighton Properties & Mirvac Group yesterday as the preferred developer for a state government holding of 5.1ha, making up 40% of the Perth City Link project and completing an $A5.2 billion transformation.

The contract for the 2 companies’ proposed masterplan is expected to be signed next year.

The city’s central business district has long been separated from what became the Northbridge entertainment, leisure & office precinct by rail lines, 2 bridges over those lines and the raised Wellington St bus station. The $A5.2 billion transformation project has included undergrounding  a section of the railway line, relocating the bus station underground & completing construction of the Perth Arena.

Mr Day said: “The development site will be transformed in the next 10-15 years into a bustling urban community incorporating a new hotel, offices, shops, cafes, bars & apartments, as well as new public spaces. This transformation will be led by private sector investment which is expected to reach $A3 billion for the 5.1ha land holding.”

Links: Perth City Link
Leighton Properties & Mirvac Group win Perth City Link project


Regular leads: Europe Real Estate, Mingtiandi, Planetizen, World Property Channel

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Commonwealth Bank proposes wider property exit than Kiwi Income management

The Commonwealth Bank of Australia confirmed yesterday that it proposed exiting the management of 3 property funds, not just the Kiwi Income Property Trust’s manager in New Zealand, Kiwi Income Properties Ltd.

The bank didn’t give a reason, said the 3 proposals were “indicative, non-binding & incomplete” and there was no certainty that any of the proposed internalisations would proceed.

It even distanced itself from the announcement, saying it “notes the announcement by Commonwealth Managed Investments Ltd”, which is the responsible entity for the 2 Australian funds proposed to have their management internalised.

They are the Commonwealth Property Office Fund and CFS Retail Property Trust Group. The bank owns Kiwi Income’s management through Colonial First State Property Ltd.

The bank said that under the internalisation proposal for CFS Retail it would also acquire the wholesale property funds management business and the integrated retail property management & development business owned by the bank.

Business Spectator columnist Stephen Bartholomeusz, surmising on the reasons, saw nothing compelling. First was a possible desire to quit exposures that carry quite heavy capital requirements under the Basel III regime. However, he said this might represent only 20-30 basis points of the bank’s tier one capital adequacy ratio, which stood at 10.5% for the December 2012 half.

Secondly, it might have concluded the property investment returns & risks weren’t worth the effort for a funds management business predominantly focused on equities & fixed interest.

And third, it might have decided to follow the trend to internalising management that has occurred in the listed property sectors in both Australia & New Zealand.

Link: Business Spectator, 3 reasons why CBA is exiting property

Attribution: Bank releases.

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Australand sells half of 2 projects to Commonwealth

Wholesale trust to take retained 50%

Australand Holdings Ltd has entered into contracts to sell 50% interests in the commercial developments at King St Wharf, Sydney, and Freshwater Place, Melbourne, to the Commonwealth Property Office Fund for $A245 million.

The Commonwealth fund’s manager, Colonial First State Property Ltd, said the fund was also buying a North Sydney property.

Commonwealth’s purchases for the day total $A317.2 million, including $A72.3 million for 201 Miller St, North Sydney. The initial combined yield on completion is 8%.

Australand will use its retained 50% of the Melbourne development to anchor a new trust which may be listed later.

Commonwealth will pay an $A20 million deposit on these 2 developments and the rest progressively over the construction period.

King St Wharf, 93% precommitted to KPMG which is taking a 12-year lease, is due for completion in December. It will have net lettable area of 27,975m² on 16 floors and 72 parking spaces.

Freshwater Place has PricewaterhouseCoopers as its sole precommitted tenant, signing for 12 years over 42%. It’s due for completion by February 2005. The property, in Melbourne’s Southbank precinct, will have a 37-level office tower and 5-level piazza, with a net lettable area of 55,172m² and parking for 550 cars.

Australand has given 5-year rent guarantees on the rest of the space in both developments.

Deal better than previous plan for Australand shareholders

Australand’s Managing Director Mr Brendan Crotty said the sale of the 2 50% interests achieved a better overall outcome for shareholders when compared to the previously announced intention to form a wholesale office trust to hold the assets, with a view to stapling the units in this trust to the company’s shares later.

The Australand Wholesale Property Trust No 4 will hold the remaining 50% of the Freshwater Place tower, plus an $A35.6 million Qantas office at Mascot, to be completed next March, and 2 Sydney industrial projects completed & leased to Coles Myer, an $A47 million project at Smeaton Grange and an $A32 million project at Huntingwood.

8.75% return ising to 9.33% for Australand investors

Trust investors will get a guaranteed 8.75% annualised return from subscription until 30 June 2004, 9% until practical completion of the last property in February 2005, then an estimated average pretax income yield of 9.33%/year to June 2008, with significant tax-advantaged benefits.

This trust will have $A117 million of equity, 20% of it from Australand. Australand’s 4 wholesale trusts will have a total portfolio of $A800 million of new industrial & commercial properties.

Australand intends that the 4th trust will either be eventually acquired by the Australand group or listed.

Colonial says 2 developments fit long-term strategy

Colonial First State, as manager of the Commonwealth fund, said the 2 50% acquisitions fitted the core component of the fund’s desired asset mix, with features such as long lease term expiry profiles, a weighting to fixed rent review structures, limited future capital needs and locations in major cbd markets, all factors combining to contribute to the stable nature of the fund’s core portfolio.

The North Sydney property fits into the fund’s enhanced return category. $8 million will be spent on refurbishment in the next 2 years. The property has been bought from the CFCL Property Trust No 1.

It has 15,269m² of net lettable area on 22 floors plus a 2-level mixed-use annexe known as the Pavilion, is 93% occupied, mostly by short-term international tenants.

Commonwealth’s funding will include $A100 million from an institutional placement. After the placement 7 initial payments, the Commonwealth fund’s gearing will fall to 21.3%, rising to 28% on completion.

Colonial First State fund manager Carmel Hourigan said: “The market is predicting that oversupply in the Melbourne market will cause a softening in market rents in the short to medium term. However, the structure of the acquisition ensures that Commonwealth is not exposed to this downturn, and that any risk to the fund’s income is mitigated from this asset until 2010.”

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