Cromwell To Join The Staplers

Sydney Morning Herald

Tuesday October 24, 2006

Carolyn Cummins

BRISBANE'S Cromwell Corporation has joined its competitors to create a $1 billion stapled property trust that will give it leverage to expand.

Under the deal the group will consolidate the umbrella Cromwell Diversified Trust with its five other Cromwell-managed syndicates to give the new vehicle a market capitalisation of about $780 million.

Reaction to the deal was swift with Cromwell units closing 20c higher at $1.20. The company plans to merge the trusts through a court-approved scheme of arrangement and a shareholder meeting is expected to be held in early December.

Cromwell chairman Paul Weightman said the deal would give the new trust more power to source assets from competitors or buy direct from developers.

He said the improved liquidity would also be a bonus for investors who have had a difficult time trading the individual syndicates on the stockmarket. Mr Weightman said the decision also reflected the diminishing demand from single property-style syndicates in the current listed property trust environment.

"The rationalisation of the deal is to align the interests of Cromwell shareholders and other investors in our business," Mr Weightman said. "We want to provide all investors with stable income growth and low risk and with improved liquidity."

In a presentation, Mr Weightman said the merger would give the new group a forecast annualised distribution of 9c a stapled security. Each Cromwell shareholder will receive between 0.8879 and 0.8917 stapled securities for each share, depending on the number of syndicates that take up the offer.

Mr Weightman said Cromwell and its syndicates have a combined weighting to the office market in most states and would "probably focus on Sydney" in the future.