This article is from the Australian Property Journal archive
ELANOR Commercial Property Fund (ECF) is launching an $85 million fully underwritten equity raising to partially fund its $113.5 million acquisition of the 50 Cavill Avenue commercial tower in Surfers Paradise.
Vendor GDI Property Group has more than doubled on the Gold Coast asset since completing its $48.75 million purchase of the 16,625 sqm tower five years ago. At the time, it was 54% occupied with no NABERs Energy rating.
Vacancy had reached around 60% following the GFC, and companies linked to owner Albert Chung – who paid $55 million for the property in 2004 – had been put into the hands of receivers in 2012.
After GPI’s works on the tower, 50 Cavill Avenue is now approximately 97% occupied and has a 4.5 Star NABERs Energy rating.
The transaction represents a passing yield of 7.0% and a capitalisation rate of 6.8%.
ECF fund manager, David Burgess said 50 Cavill Avenue is the “pre-eminent commercial building on the Gold Coast, a region that is very well positioned for further strong economic growth”.
“This investment typifies ECF’s strategy of acquiring assets that have strong competitive advantages in their respective markets,” he said, adding that it is being acquired significantly below replacement cost.
Its $84.7 million equity raising is being undertaken at an issue price of $1.10 per security, including a 1 for 5 accelerated non-renounceable entitlement offer to raise $45 million, and an institutional placement to raise $39.7 million.
The issue price of $1.10 per security represents a 4.8% discount to the last traded price on Friday, and the raising will result in the issue of approximately 77 million new ECF securities, increasing its market capitalisation by 36% to approximately $321 million post equity raising.
After selling costs and other adjustments, GDI anticipates netting about $109 million from the sale, an $8 million premium to the 30 June 2020 carrying value of $101.0 million.
“We realised that 50 Cavill Avenue could be the preeminent business address on the Gold Coast. We identified opportunities for capital expenditure to improve the asset’s appeal, reduce its operating costs and improve its environmental performance. We were confident that if we did this the occupier market would follow, and we are very pleased with our successes on all these facets,” managing director of GDI, Steve Gillard said.
GDI will use the proceeds from the sale to repay its existing loan facilities. Following repayment, GDI will have only approximately $60 million of drawn debt on its principal facility.
Settlement of the sale is anticipated by the end of the month.
ECF posts preliminary results
ECF also revealed its preliminary full-year results that included funds from operations of 12.54c per security – 20% higher than PDS forecast – and distributions of 10.03 cps.
FY22 guidance is for FFO per security of 10.8 cps and distributions of 9.4 cps.
A valuation uplift of $5.9 million took portfolio valuation to $384.5 million with a weighted average capitalisation rate of 6.6%.
“The performance of ECF during FY21 has been exceptionally strong in challenging market conditions. The acquisition of 50 Cavill Avenue further enhances the fund’s portfolio of high investment quality commercial office properties invested in favourably positioned markets,” Elanor CEO, Glenn Willis said.
