16/02/2011 - 12:49

Aspen acquires Adelaide tower project

16/02/2011 - 12:49

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Aspen Group has finalised a deal to acquire a $183 million office development in Adelaide from one of its part-owned funds, which had previously been unable to secure a pre-sale of the building.

Aspen Group has finalised a deal to acquire a $183 million office development in Adelaide from one of its part-owned funds, which had previously been unable to secure a pre-sale of the building.

The 36,700 square metre Australian Taxation Office Building, previously known as Tower 8, is part of Aspen Development Fund No.1 (ADF)'s Adelaide City Central precinct.

Aspen Group is the fund manager and major shareholder of ADF.

Under the agreement, Aspen will purchase the land from ADF and fund the construction of the building, at a cost of $183 million, incorporating holding costs calculated at a rate of 9 per cent

Total net cash outlay is expected to be $164 million, of which Aspen has already provided $18 million, and the debt component is expected to be around $115 million, Aspen said.

Aspen said it would sell more assets from its existing portfolio to fund the equity component of the purchase.

Aspen expects starting net operating income of $14.3 million from the asset, which has been 98.5 per cent pre-committed to the ATO and Australia Post.

The acquisition is conditional on securing debt funding, but Aspen has provided guarantees totalling $70 million, including $60 million of guarantees to the builder to keep the building timetable on track.

"The benefits to the Aspen Group of acquiring the asset are very compelling from a standalone investment perspective and also supports our investment in ADF of which we are the major shareholder," Aspen Group managing director Gavin Hawkins said.

"The issue of the guarantees prior to obtaining debt funding allows the project to proceed within the development timetable and we are confident of securing the senior debt funding in the short term."

"The development is currently on schedule and importantly all of the in-ground earthworks and foundation works have been completed, significantly reducing the risk of the remainder of the construction program and a major milestone for debt financiers."

Meanwhile, Aspen also announced today it had extended its debt facilities with National Australia Bank for an additional three years, until 2014.

Mr Hawkins said the NAB agreement was a very positive outcome for the group.

"The new guarantee facility will be utilised to assist with the purchase and development of the ATO office building, a landmark investment grade asset," he said.

"The group is very pleased to be moving to a more industry-standard facility arrangement.

"The new facility is expected to deliver to the group a reduction in its current debt facility margin if key milestones in the development of the ATO office building are achieved as expected over the next 3 to 6 months."
Mr Hawkins said the NAB agreement was a very positive outcome for the group.

"The new guarantee facility will be utilised to assist with the purchase and development of the ATO office building, a landmark investment grade asset," he said.

"The group is very pleased to be moving to a more industry-standard facility arrangement.

"The new facility is expected to deliver to the group a reduction in its current debt facility margin if key milestones in the development of the ATO office building are achieved as expected over the next 3 to 6 months."

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