Letter to CMA investors
An opportunity to create Australia’s premier pure play metropolitan property investment vehicle
I am writing to you as a unitholder in the Centuria Metropolitan REIT (ASX:CMA) to inform you about an opportunity my team is pursuing on your behalf.
I believe this opportunity, should we be successful, will improve your long term investment outcomes as a stapled security holder in CMA.
As you may be aware from recent media coverage, Centuria Capital last week acquired on market a 12.6% investment in GPT Metro Office Fund (GMF). This was done with the intention of assisting Centuria Metropolitan REIT (CMA), who at the same time acquired an investment of 3.5% in GMF. Our proposal is to merge CMA with GMF to create the most dominant pure play investment vehicle in the Australian metropolitan real estate market place.
CMA was established in December 2014 to be a conservatively managed passive investment vehicle focussed on delivering quality earnings and quarterly distributions, with the opportunity of capital growth.
In considering and structuring the proposed merger with GMF it has been foremost in our minds that CMA’s distribution outlook and investment fundamentals remain unchanged.
We believe the proposal is true to our track record of delivering CMA’s stapled security holders the
benefit of portfolio improvement and scale that will lead to capital advantages.
Potential portfolio benefits of a merged entity include:
- Greater asset and geographic diversification
- Substantial reduction in single tenant exposure
- Average lease expiry (WALE) increases to over five years
- Maintains a focussed investment mandate with continued access to Centuria’s specialised metropolitan office property management platform
Potential scale benefits include:
- Potential to increase FY 2017 earnings
- Economies of operational scale should lead to reduced operating costs
- Additional exposure to global companies and Government departments like Optus, Samsung, Lion, and Queensland Urban Utilities
- Opportunity to participate in the future growth and benefits derived from a larger merged Fund and the potential for a security price re-rate as a result of the proposal
Potential capital & listing advantages include:
- Reduced cost of capital allowing the combined fund to be more competitive in securing new investment opportunities
- Increase in market capitalisation to approximately $550 million which is expected to attract a greater number of potential investors
- Potential for improved liquidity due to inclusion S&P/ASX 300 index
Not all investment opportunities present themselves as straight forward asset acquisitions so Centuria’s capital market capabilities place it in a good position to analyse a corporate transaction such as the proposal currently under consideration.
However, at the foundation of any transaction must be quality real estate, which the GFM portfolio is. It meets our investment criteria, being “fit for purpose”, modern, located in established and popular locations, and leased to robust organisations.
As we are in a competitive process you may see reporting in various media or market commentary as the transaction proceeds. Other parties may seek to question Centuria’s capability and efforts to acquire the GMF portfolio. This will not distract us from a disciplined review of the opportunity.
If successful in creating a merged entity we firmly believe the enhanced Centuria Metropolitan REIT will continue to be another great investment for your continued consideration.
Information on the proposed transaction is available on our website. If you have any questions about these investments or any aspect of your relationship with the Centuria Group please don’t hesitate to call myself, or Nicholas Blake on our office numbers below – we would be only too pleased to discuss them with you.
For further information, please click on the below link to view the announcements made to the ASX:
CEO – Listed Property Funds
Information about the GPT Metro Office Fund can be found here