Australia-based Centro Watt‘s bid last week to take over Heritage Property Investment Trust would result in the largest purchase of a U.S. real estate investment trust by an Australia listed property trust to date. The proposed $3.2 billion acquisition would also make Centro one of the largest owners of strip mall centers in the U.S. and highlights the number of Australia listed property companies that have snapped up U.S. retail properties over the past year.
Centro will contribute about $1.9 billion of equity via its existing unlisted wholesale funds and syndicates. It will maintain a 25% stake in the portfolio. Ultimately, the company expects to move about $2.6 billion of Heritage’s assets into new and existing funds it co-owns and manages, an official said. About $700 million of the portfolio will either be divested or improved and moved into Centro’s funds later. Centro also expects to create an international wholesale fund with about $700 million of Heritage properties. The fund will be geared toward investors seeking access to U.S. retail.
A number of Australian listed property companies have been targeting the U.S. market. This includes Macquarie CountryWide‘s agreement to pay $1.1 billion for a 65% stake in the First Washington Shopping Centre portfolio. Galileo Shopping America Trust paid $990 million for a New Plan Excel portfolio and Macquarie Office Trust paid $890 million for the Maguire Properties Group portfolio. Analysts said a strong pipeline of Australian-U.S. property deals are in the works.
The deal, which also involves private Los Angeles-based Watt Commercial Property, has a 7.3% cap rate, which is fairly high for the United States but not so much for Australian bidders. Centro Watts is paying $36.15 per share in cash, which represents a 5.7% premium to Heritage’s average closing price over the past 10 days, and a 7.3% premium to the average closing price over the past 30 days. Centro and its spin-off, Centro Retail Trust, also have acquired majority interests in seven American shopping centers from Westfield America for $524 million.