14/10/2003 - 22:00

Multiplex targets LPTs

14/10/2003 - 22:00


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FROM humble beginnings in the 1960s, self-made construction baron John Roberts has steered his flagship company, Multiplex, to the pinnacle of the Australian construction industry.

Multiplex targets LPTs

FROM humble beginnings in the 1960s, self-made construction baron John Roberts has steered his flagship company, Multiplex, to the pinnacle of the Australian construction industry. 

Now, Mr Roberts is restructuring the company to make a splash in the growing listed property trust sector (LPT).

The $1.1 billion initial public offer of stapled securities will open on November 12 and close December 3, with the newly listed Multiplex Group (MXG) to commence normal trading as a listed company before the year is out.

The float will reshape the construction and development business with an additional property ownership arm, Multi-plex Property Trust, which is being marketed with a distribution yield of between 8.4 per cent and 9 per cent with a 5.5 per cent growth forecast.

The rationale behind tying the LPT with the existing business through stapled security and IPO is to allow the company greater access to debt markets and to increase the depth and profitability of its development projects.

The Roberts family plans to retain 42 per cent interest in the company by reinvesting proceeds from the sale of shares back into the property trust.

Valued at $1.5 billion, the Multiplex LPT comprises predominantly A-grade office and shopping centres, with 75 per cent of the properties developed by Multiplex

The only Western Australian properties to feature in the folio are the $47.2 million Ernst & Young Building and the $48.4 million Carillon City Shopping Centre.

The six-level Ernst & Young Building –to be completed in 2004 and leased out to Ernst & Young till 2016 with fixed increases of 4.75 per cent per annum – has a passing initial yield of 7.4 per cent.

Other significant buildings in the portfolio include Melbourne’s Southern Cross development, which will be worth $40 million on completion, and Sydney’s Ernst & Young Centre, which will be completed in 2005 and valued at $422 million.   Both buildings will deliver yields between 8 per cent and 9.75 per cent.

About 80 per cent of the trust income stream will be drawn from major international and government tenants – the trust’s portfolio sports an average lease term expiry of 8.6 years (the average LPT’s is 5.3 years) and an average building age of 4.2 years.

The trust will feed off new acquisition opportunities through Multiplex’s internally generated assets, which has a potential pipeline of $1 billion over five years.

Assets will be sourced from third parties, existing Multiplex developments and assets sourced from cornerstone investors with a property weighting of 15 per cent retail properties and 85 per cent office buildings.

Multiplex has forecast that about 43 per cent of its earnings will be derived from the trust in the 2005 financial year and the company is aiming for the majority of its earnings in the future to be generated by the listed property trust.

In comparison, its development arm is expected to yield 21 per cent of earnings and construction 35 per cent.

With a project turnover in excess of $2.1 billion for the 2003 financial year, Multiplex has plans to further grow its domestic market share and is seeking to increase its growth in the UK, Middle East and Europe.

Over the past five years Multiplex has increased its activity in development and has forecast development earnings to grow from $52.5 million in 2004 to $56.6 million in 2005.

With the establishment of its residential development division, Multiplex Living, in 2002, Multiplex now has 2,445 apartments in construction and 5,455 apartments in the pipeline, with time lines extending to 10 years.

While all its current development projects are based in Australia, Multiplex has established a development team in the UK where it plans to adopt the Multiplex Living brand.

Another emerging business in the Multiplex stable is its facilities management division. Established in 1998, the division has 39 properties under property management and has forecast its profit before tax to grow from $2.2 million in 2003 to $4 million in 2005.



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