The Financial Review, 12 May, 2006.

APT raising cash for expansion
BEN WILMOT

The $75 million Government Property Trust is on the hunt for more properties as it looks to stake a position as a leader in its specialised niche.

The trust, established by Australian Public Trustees, is targeting properties occupied by federal, state and local governments and semi-government authorities on medium to long-term leases. “Government-leased assets deliver to investors a more secure forecast yield and relatively low risk,” APT chief executive Darren Olney-Fraser said. APT is seeking to raise up to $10 million from retail investors and $20 million from institutional investors for the trust. “At the completion of the current capital raising period the trust will have a war-chest of between $6.7 million and $11.4 million, and it is our intention to seek further properties for our acquisition by the trust,” Mr Olney-Fraser said. Australian Public Trustees says it will seek to purchase properties that are expected to be yield accretive within three years of purchase. It is targeting a long-term loan to valuation ration of no more than 70 percent.

The ATO building in Geelong is already part of the Government Property Trust's portfolio

The trust is offering a fixed yield of 8.25 per cent per annum for three years and will allow investors to redeem their units after the tree years. Interestingly, the units provide investors with preference to distributions and redemption but no capital gain.

APT argues that government-leased properties offer a stability of income that is difficult to find in the retail, commercial or industrial sectors.

The trust has already put together a geographically diverse property portfolio. It has the $37.5 million Penrhyn House in Canberra, which is occupied by the federal Department of Health and Ageing under contract from Investa Property Group.

The Department of Human Services office in Bendigo, Victoria, and the Australian Taxation Office in Geelong are also part of the trust. In addition, it will hold a $1.8 million stake in a Vicroads building in Sunshine. Other assets include stakes in two Centrelink buildings in Western Australia valued at more than $30 million.

The trust will invest $7.65 million in a Centrelink call centre in Bunbury and $6.8 million in a Centrelink customer centre in Midland. The buildings show net rental yields ranging from about 7.5 per cent to 11.8 per cent per annum.

At the completion of the capital raising, the manager will have funds of $140 million.

Its non-executive chairman is former Victorian education minister Don Hayward and it has an education fund which is looking to acquire some classroom units.

APT is also working with architects to develop modular buildings that can be used in education or on construction sites.
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