360 Capital 111 St George’s Terrace Property Trust
strategy
In April 2011 Unitholders approved an extension of the Trust term by five years to January 2017 so to allow the Trust to take advantage of this potential upside from the Property and benefit from a potential improvement in market conditions.
Trust performance is determined by macroeconomic factors such as the health of the economy and the level of interest rates, ongoing leasing and asset management success in the underlying properties as well as capital and fund management initiatives.
The 44.4% increase in forecast FY2012 distributions to 26.00cpu reflects the repositioning of the property, strengthening Perth office market conditions and capital management initiatives including resetting interest rates within the Trust’s finance facility.
Management is focusing on the following:
- Finance facility – During the Half Year to 31 December 2011, the Trust entered into a new three year debt $60.0m facility with Bankwest to repay the preexisting Trust debt of $36.4m and fund the remaining capital expenditure associated with the lift refurbishment. A hedging strategy was also be implemented in order to mitigate risk associated with interest rate exposures over the extended term.
- Proactive re-leasing – In terms of upcoming FY2012 lease expiries, WA Industrial Relations Commission (WAIRC) was the major expiry (June 2012) representing 19.3% of Trust income. Terms for a new twelve year lease to the WA Government from 1 July 2012 have recently been agreed and are subject to documentation. The new lease reflects an increase in the passing rent. The Ministry of Justice has also exercised its three year option to renew its lease from March 2013. These leasing transactions account for over 34% of the Property's NLA and are expected to increase the WALE to more than five years. 360 Capital continues to actively lease the remaining retails tenancies which were created as part of the ground floor refurbishment.
- Forecast Distribution payments – Reflecting the repositioning of the property and strengthening Perth office market conditions, capital management initiatives and the re-setting of the interest rate swap, the final FY2012 distribution is now forecast to be 26.00cpu, a 44.4% increase over FY2011. Distributions will continue to be paid on a monthly basis.
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