Brisbane-based Cromwell Property Group and Australian Unity Property Limited (AUPL) have agreed to merge two unlisted property funds under their management to create a A$1.1bn (€670m) entity.
When merged, the Cromwell Direct Property Fund (CDPF) and Australian Unity Diversified Property Fund (AUDPF) will have a combined portfolio of 15 diversified assets located across Australia, mostly on the eastern seaboard.
Separately, Cromwell has entered a share sale and purchase agreement with Australian Unity to acquire AUPL, the responsible entity of AUDPF, for a total consideration of A$17m, payable in instalments.
Cromwell’s chief investment officer, Rob Percy, said the proposed transaction aligned with Cromwell’s strategic exit from non-core assets, and recycling of capital to grow Cromwell’s funds under management.
He said the deal would add approximately A$425m in third-party gross assets to its Australian platform.
Percy added: “This transaction continues our journey to a capital-light funds management business model and enables us to continue to provide Cromwell investors with long-term stable and risk-adjusted returns.”
Joe Fernandes, chief investment officer and executive general manager, funds management, at Australian Unity, said the creation of a combined fund would benefit investors through increased scale, diversification and income and distribution stability.
The merger is conditional upon AUDPF unitholder approval and the satisfaction of other conditions precedent. If these conditions are met, the merged fund will adopt Cromwell Direct Property Fund’s existing framework and AUDPF unitholders will be issued units in CDPF.
The proposal is structured so that investors in the Australian Unity fund will receive units in the Cromwell trust. Australian Unity said the unlisted merged fund’s unit price was expected to be at a 4.5% premium to the fund’s stand-alone unit price.
The merger is expected to be completed in late 2023.
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