Cromwell’s CDPF and Australian Unity’s AUDPF in $1.1bn merger

Oksana Patron

7 July 2023

Cromwell Funds Management Limited, the responsible entity (RE) of the unlisted Cromwell Direct Property Fund (CDPF), has announced it has entered in a merger with Australian Unity Property Limited (AUPL), the RE of the Australian Unity Diversified Property Fund (AUDPF), which will see the merged fund comprising a portfolio of 15 assets valued at around of $1.1 billion.

In the announcement to the Australian Securities Exchange (ASX), Cromwell said that the transaction was in line with its strategy and continued the firm’s “journey to a capital-light funds management business model”, which will see the unitholders in CDPF and AUDPF owning interest in a more diversified and stable merged fund with improved geographic and sector diversification.

In the same announcement, Cromwell said that it entered in the agreement with Australian Unity Limited to acquire the AUDPF’s responsible entity, AUPL, for a total consideration of $17 million, payable in instalments and a subject to the AUDPF unitholder approval.

“The proposed transaction aligns with Cromwell’s strategic exit from non-core assets and recycling of capital to grow Cromwell’s funds under management, adding approximately $425 million in third-party gross assets to our Australian platform,” Cromwell’s chief investment officer, Rob Percy, said.

Also, as part of the proposed merger, the Cromwell Diversified Property Trust, will subscribe for units in CDPF, up to $12 million to assist in funding a one-off withdrawal facility for AUDPF unitholders.

“We are excited by this opportunity to merge the Australian Unity Diversified Property Fund with the Cromwell Direct Property Fund with the Cromwell Direct Property Fund to create a combined fund that benefits investors through increased scale, diversification, and income and distribution stability,” Joe Fernandes, chief investment officer and executive general manager, Funds Management at Australian Unity, commented on the announcement.

According to Morningstar, the Cromwell Direct Properties Fund invests directly, or through unlisted property trusts, in non-residential property with a focus on commercial, industrial and retail.

The fund’s portfolio consists of nine assets across Brisbane, Adelaide, Townsville, Queanbeyan, Dandenong (Victoria) and Mascot (NSW).

The Australian Unity Diversified Property Fund holds a portfolio spanning retail, office and industrial sectors, with current investments in shopping malls  and services centres in Western Australia, New South Wales and Victoria.