Babcock, GPT call off European property IPO

Babcock & Brown, Australia's second-largest investment bank, and the Sydney-based property firm GPT Group have backed away from a plan to list a Pan-European retail property fund - just over two weeks after the initiative was announced.

The joint venture partners said they believed the 'proposed IPO would not have sufficiently realised the full value of the initial portfolio'.

Putting a positive spin on the about-face, they suggested a better outcome could be achieved through other 'capital raising and structuring options'. These options included a syndication of equity in the portfolio assets to the direct investment market and/or the creation of a more simplified real estate investment trust (REIT) structure.

The latter option, the statement added, could take advantage of the introduction of new legislation in specific European markets. The UK and Germany are to introduce REITs legislation in January 2007, and Italy may follow later in the year. France, Belgium and the Netherlands are among the European countries that already have a REIT or a REIT-like structure.

On November 21, Babcock & Brown and the GPT Group announced they intended to raise EUR 400 mln from the initial public offering of shares in Guernsey-based Babcock & Brown GPT European Retail Fund on Euronext Amsterdam stock exchange. The joint venture proposed to issue 24,718,313 shares at EUR 15.20 to EUR 17.00 a share, implying an offer size of EUR 400 mln at the mid point of the offer price before any over allotments.

The fund was to invest in pan-European retail property sector and the joint venture anticipated a total annual shareholder return of about 11%, their statement indicated at the time. Babcock & Brown and GPT were each to hold at least 15% of the company after the IPO.

The fund was to be backed by a portfolio of 294 retail assets with a gross value of about EUR 1.5 bn, making it one of Europe's largest listed owners of retail assets. The seeding portfolio was to comprise supermarkets and shopping centres in Germany and Switzerland.

Citing the 'depth of direct market in quality assets with a strong defensive cash-flow profile', Phil Green, ceo of Babcock & Brown, said in Thursday's statement that the joint venture was 'very confident of the high quality and values of the properties in the portfolio'.

And, Nic Lyons, ceo of GPT, insisted: 'The withdrawal from the IPO process does not alter the joint venture's strategy to create and grow a funds management business'. Rather, he said, the move simply reflected both GPT and Babcock & Brown's determination that the IPO at this time was not going to achieve an 'optimal outcome'.