Macquarie CountryWide Trust has announced it will raise A$843 million to purchase a US$2.79 billion portfolio of shopping centres in the US with joint venture partner Regency Centers (Regency). The transaction is set to transform the Trust into a major global grocery-anchored retail trust giving the Trust further exposure to some of the most attractive markets in the US, such as Washington, DC / Baltimore and California.
Announcing CountryWide´s most significant transaction to date, Ms Kylie Rampa, Chief Executive of the Trust´s Manager, Macquarie CountryWide Management Limited (MCML), said: 'The high quality of the assets, grocer strength, attractive demographics and forecast positive impact on the Trust´s performance* combine to deliver a unique investment opportunity, which we´re excited to bring to CountryWide investors.'
CountryWide is proposing to raise equity of A$843 million through a renounceable rights issue (RAPIDSTM) and placement, and approximately A$85 million through a fully underwritten June 2005 Distribution Reinvestment Plan (DRP). Macquarie Bank Limited will take up its full entitlement under the renounceable rights issue, an additional investment of approximately A$49 million, which forms part of the total equity being raised. The remaining A$1.53 billion will be funded with debt. The new units issued under the offer reflect a forecast yield of 8.4 per cent on the issue price for the year ending 30 June 2006*.
The offer is fully underwritten by Macquarie Equity Capital Markets Limited, Citigroup Global Markets Australia Pty Limited and Merrill Lynch International (Australia) Limited.
A high quality portfolio
CountryWide intends to acquire a 65% indirect interest in a portfolio of 101 properties from the First Washington Investment I, LLC and California Public Employees´ Retirement System (CalPERS) joint venture (First Washington Portfolio), plus a 75% indirect interest in two additional US assets, with the remaining interests being acquired by its long standing joint venture partner, Regency. The entire transaction reflects a forecast combined first year yield of 6.25 per cent* (pre acquisition costs) and will increase CountryWide´s US exposure to approximately 75 per cent of total property assets. This acquisition remains subject to certain conditions.
The two additional shopping centres being purchased are Bear Creek (California) and Heritage Plaza (Illinois). Bear Creek is a recently completed Regency development and will be acquired directly from Regency. Heritage Plaza is a third party acquisition.
The First Washington Portfolio is one of the highest-ranking grocery retail portfolios in the US by demographic profile and buying power. The portfolio enjoys high, stable occupancy rates above 96 per cent and a strong historical income growth performance. The portfolio has been independently valued on a portfolio basis at US$2.75 billion by CB Richard Ellis and is contracted for purchase for US$2.74 billion.
Approximately 77 per cent of the US grocery anchor tenants are ranked in the top three by market share in their respective markets. Tenants feature leading US grocers and traditional CountryWide tenants such as Safeway, Albertson´s, and Kroger. Major drug stores and other national retail tenants anchor the remaining centres. The Trust plans to sell five of the properties in the short term.
Explaining the importance of major grocery anchor tenants, Ms Rampa said: 'The dominance of major grocery retailers not only adds to CountryWide´s income security but also helps when negotiating leases with speciality retailers, attracting new tenants and re-leasing to existing tenants.'
The properties are spread across 17 states and the District of Columbia with 45 per cent of the centres located in the Metropolitan Washington, DC/Baltimore area, Southern California and Northern California. This high weighting to large US cities delivers an impressive demographic profile. On average, over 110,000 people live within a three mile r