White Knight may Emerge For AOF

30 January 2020

Australian Unity announced today that the Responsible Manager for AOF, Australian Unity Investment Real Estate Limited (AUIREL) will (subject to conditions) be sold to a joint venture between Australian Unity and Keppel Capital.


AOF will remain an ASX listed REIT, and the change in AUIREL's ownership will not change AOF's strategy, management agreements and governance structure, including the composition of the AUIREL Board which will continue to comprise a majority of independent directors, other than Keppel Capital being entitled to appoint a director to AUIREL.


The change may however have implications on the proposed takeover proposal by Starwood. Starwood announced that their Intended Offer for AOF will be subject to a number of conditions including that a change of control does not occur or is not agreed to occur in respect of AUIREL. The Board of AUIREL notes that the agreements entered into by Australian Unity in relation to the ownership of AUIREL with Keppel Capital will mean that this condition will not be satisfied, requiring Starwood to revise this condition.


The joint venture will expand the range of assets and funds available to investors in the Australian metropolitan office property sector. It will also, subject to satisfaction of customary conditions, become the owner of the Responsible Entity for Australian Unity’s existing

metropolitan office fund.


Mr Mark Pratt, Executive General Manager, Property of Australian Unity’s Wealth & Capital Markets business said, “Keppel Capital is a logical and compelling joint venture partner for Australian Unity. Keppel has demonstrable experience sourcing assets and capital that will supplement Australian Unity’s activities in the Australian metropolitan office sector. Keppel’s purpose of providing solutions for sustainable urbanisation also fits strongly with Australian Unity’s focus on the health, wealth and living of Australians.”


Ms Christina Tan, CEO of Keppel Capital, said, “Our partnership with Australian Unity marks a significant milestone for Keppel Capital as we seek to deepen our Australian footprint. Australian real estate continues to be an attractive asset class, generating attractive income returns in a low yield environment. Leveraging the strengths and network of Australian Unity, we are excited to commence this partnership to create investment opportunities for investors in the Australian metropolitan office markets.”


Keppel have not made any announcement in relation to any intention to acquire any of the units in AOF or to make a counter proposal to the Starwood offer. Any bid for units by Keppel may or may not be seen as a related party transaction and may result in the group unable to vote on any proposed scheme put forward to investors.


Australian Unity noted that the formation of the joint venture with Keppel Capital is "unrelated" to the announcement of the intended offer by Starwood and is the result of a number of months of confidential detailed discussion and negotiation between Australian Unity and Keppel Capital. With assets under management of approximately S$33 billion as at end 2019, Keppel Capital has a diversified portfolio that includes real estate, infrastructure and data centre assets in key global markets.


The establishment of the Joint Venture may assist Australian Unity to grow the fund and provide an alternative way forward for Australian Unity investors.