Australian Unity Office Fund considering Sale of Assets

10 March 2022

The Australian Unity Office Fund has been unable to generate acceptable outcomes for its investors and is now considering the sale of all its assets.

Australian Unity is caught between a rock and hard place with investors on the one hand not wanting to accept a sale of the assets or the acceptance of attractive take over offers, whilst on the other hand unable to effectively raise further capital to grow the fund to provide diversity and ongoing growth that is otherwise required.

In 2018, the Australian Unity defended an offer for the Fund by Starwood, followed in 2019, by an Abacus / Charter Hall proposal which ultimately gained the support of the Board. At the time, AOF’s major investor, Hume Partners increased their interest to 9.5% causing Charter Hall and Abacus to offload their 19.9% interest but still half-heartedly proceeding with the takeover offer without a direct interest, ruffling the feathers of ASIC in the process. Starwood seized upon the opportunity and re-entered the auction in 2020, however the onset of COVID19 brought a halt to all of the action.

The Board of the Fund agreed to undertake a strategic review to consider the best options for unit holders. As part of the review the Board understood that many of AOF’s investors felt that the capital gain tax issues on the disposal of the assets eroded their value and as such there was little support for the takeovers, so in 2021 Australian Unity proposed a merger of the Fund with its sister fund, The Australian unity Diversified Property Fund. But that proposal was also knocked on the head.

Australian Unity has attempted to focus on initiatives to maximise value for investors and in its recent annual address, identified 3 major focus areas;

  • The delivery of asset refurbishments and repositioning opportunities, while maintaining strong occupancy from multi-tenanted assets;
  • Divesting some or all properties and returning capital to unitholders; and
  • Considering a portfolio sale via a corporate transaction.

Australian Unity has continued to receive numerous enquiries from parties regarding the Fund and its assets and has been working with Highbury Partnership as a financial adviser to review the options. The Group have provided information of the Fund and its assets under confidentiality agreements to a number of interested parties.

In an effort to bring a resolution to the Fund, the Manager has now also appointed Colliers and Knight Frank to jointly investigate the sale of AOF’s properties.

Australian Unity advise that they remains focused on maximising value for unitholders, however it would appear that selling the assets is really only going to crystallise the capital gains issues that the investors had already expressed displeasure in. It would seem to us that a change in the RE and an injection of fresh capital into the trust would be the better outcome. Happy to throw my hands in the ring!