Charter Hall, Abacus Property lodge takeover bid for Australian Unity Office Fund

30 Pirie Street, Adelaide, SA. One of AOF's property portfolio.

Australian property groups Abacus Property and Charter Hall Group have jointly lodged an all-cash proposal to acquire ASX-listed Australian Unity Office Fund (AOF), according to a stock exchange disclosure.

Abacus and Charter Hall had earlier formed a special purpose vehicle to acquire a 19.9 per cent strategic interest in AOF for A$95.6 million ($66.6 million). The consortium, in which both the parties own 50 per cent, now wants to fully acquire AOF for A$2.95 cash per unit.

The two firms said they would now seek to initiate discussions with AOF’s responsible entity regarding a potential transaction.

AOF owns a diversified portfolio of nine office properties located across Australian metropolitan and CBD markets in Sydney, Adelaide, Melbourne, Brisbane, and Canberra.

The fund has previously been a takeover target for Starwood Capital Group. It rejected the bidder’s advances in November 2018 after Starwood reduced its bid to approximately A$467.3 million ($323 million) from nearly A$480.4 million ($335 million).

Australian Unity Investment Real Estate Limited (AUIREL), the responsible entity of AOF, confirmed receiving the unsolicited and non-binding proposal. It will establish an independent board committee to discuss the offer.

AUIREL, however, said it has not received a proposed timetable from the consortium.

The proposal is subject to a number of conditions including confirmatory due diligence on an exclusive basis, AUIREL and the consortium entering into a scheme implementation agreement that is unanimously recommended by the independent directors of AUIREL, and approval from the Foreign Investment Review Board.

Listed on the ASX in 2002, Abacus is an Australian diversified property group that specialises in investing in real estate opportunities. As of 31 December 2018, the firm owned a A$2.2 billion portfolio of office, self-storage, retail, and industrial properties, in addition to a portfolio of legacy non-core investments valued at approximately A$385 million.

Charter Hall Group, on the other hand, is also an ASX-listed fully integrated property group, with A$28.4 billion of high quality, long-leased property across the office, retail, industrial, and social infrastructure sectors.

Australia’s commercial property sector is defying a softening in home values, with city downtown capacity barely growing and demand outstripping supply.

A CBRE outlook for Australian property markets in 2019, however, showed that headwinds have emerged in the economy that will have a detrimental impact on property markets, with expectations of residential and retail bearing the brunt of it.