Property investment fund manager Clarence Property last week launched the first capital raising in six years for its flagship unlisted Westlawn Property Trust, in a bid to raise up to $40 million to retire debt and fund new acquisitions.
Ballina-based Clarence will issue 25.3 million units in Westlawn Property Trust at 79 cents per unit to lift the Trust’s issued capital from $120 million to $140 million and lower its borrowings to $80 million and gearing from 49% to 39%.
Clarence managing director Peter Fahey says that if the offer is fully subscribed, it will be extended to raise a further $20 million and reduce gearing to 29%.
The capital raising is only the fifth in 22 years for Westlawn, which has not failed to pay a monthly distribution to unit holders since the Trust’s inception in 1994.
Currently the fund is providing a cash yield of more than 8.2% per annum to its 950 unit holders. The disclosure document for the new issue forecasts maintaining this yield through until 30 June next year.
Mr Fahey says existing investors in the trust are mainly based in northern NSW and many of them are expected to increase their stake in this latest capital raising.
“We also think we will see a solid response from investors right around the country,” he said.
“Westlawn has a solid history of delivering stable, tax-friendly monthly distributions to its investors.
“We’ve always understood that property is a long-term investment, so we are positioned to be around for the long term. We like to maintain conservative gearing and use new investor capital from time to time to retire debt and fund quality new property acquisitions, as we plan to do this time.
“Westlawn is the kind of fund that will have a lot of appeal for a wide range of investors, from small self managed super funds right through to wholesale and institutional investors.”
Westlawn’s last capital raising was in June 2009.
The minimum investment for the current round is 10,000 units, or $7900.
Westlawn currently has a $200 million diversified portfolio comprising 16 commercial and retail properties located between Port Macquarie and the Gold Coast together with a range of securities investments.
The portfolio has an occupancy of more than
94.5% and a weighted average lease expiry of more than 2.7 years. Gross annual rental income is $17.8 million.
Included in the portfolio is the 80-hectare Epiq Lennox residential and commercial land development site, located in one of Australia’s fastest-growing coastal towns, Lennox Head. The site is approved for around 500 house lots, together with a supermarket, a commercial precinct and a retirement living precinct. The first stage of the development is well underway with the first 51 house lots all sold for a gross realisation of $12.8 million. These are due to settle in mid-2016.
Most recently the trust acquired a 50% stake in one of the Gold Coast’s premier commercial buildings, ‘The Rocket’, a 16-level A-grade office building at Robina, in a $70 million joint purchase with Sentinel Property Group.
Mr Fahey says the current capital raising will give the trust the potential to extend its portfolio to $300 million in assets.
“We see excellent opportunities to acquire new commercial and retail properties in strategic locations that will potentially allow us to improve returns for our unit holders,” Mr Fahey said.