Centuria Metropolitan REIT agreed to pay A$500.9 million to purchase a four-property portfolio valued at A$520.9 million from Hines Global REIT Inc. and will partially finance the deal through a roughly A$276 million underwritten equity offering.
The portfolio comprises the entire stakes in 818 Bourke Street, in Docklands, Victoria; 825 Ann Street and 100 Brookes Street in Fortitude Valley, Queensland; and a 25% stake in 465 Victoria Avenue, in Chatswood, New South Wales. The trust's substantial unit holder, The Lederer Group, will purchase the remaining 75% interest in 465 Victoria Avenue and the two will sign a co-ownership agreement for the property.
The deal value reflects an initial yield of 6.3% and does not include transaction costs and a A$20 million contribution from Centuria Capital Group, the parent of the office REIT's responsible entity Centuria Property Funds Ltd.
Centuria Capital's contribution will be in the form of subscription of shares in Centuria Property, which will be held on trust for the REIT's unit holders and will go toward the portfolio acquisition.
Meanwhile, the A$276 million equity offering comprises a one for three accelerated non-renounceable entitlement offer to raise A$197 million, and a A$79 million institutional placement.
The new securities will be issued at A$2.43 apiece and will be eligible to the full distribution for the quarter ending Dec. 31, with the distribution expected at 4.358 Australian cents per security.
Moelis Australia Advisory Pty Ltd. and UBS AG's Australian branch are the underwriters for the equity offering, while Shaw & Partners serves as co-lead manager. HWL Ebsworth is the legal adviser to the trust's responsible entity.
In addition, the trust expects its funds-from-operations guidance for the fiscal year 2019 to be at 18.7 cents per security, which includes the impact of the transaction and equity raising. The distribution-per-unit guidance for the period is 17.6 cents per security, while pro forma gearing is projected to increase to 36.6% from 28.3%.
Centuria Metropolitan also started a marketing campaign for the sale of its remaining non-core industrial assets, anticipated to lower its gearing within the range of 25%-35%.