Business Activities
Australian Real Estate
Development Partnerships
Since the mid 1990s Babcock & Browns property investment activities have extended to real estate development in partnership with construction firms and developers with access to opportunities in specialist areas. Babcock & Brown has typically contributed finance in the form of either mezzanine debt or equity (or a combination) to individual development projects with a significant portion of this funding coming from the BBRE fund.
A selection of Babcock & Brown's development partnerships are shown below.
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Victoria Park
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Cardy & Co
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6.2ha site in Zetland, South Sydney. Site is planned for a predominantly residential, mixed-use development
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1,000
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2009
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Ascot Vale
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Urbex
(BMD Group)
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Proposed scheme is a master-planned residential precinct in Melbourne
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240
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2008
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Sydney Olympic Park
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Multiplex
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Residential apartment development in Homebush, Sydney
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350
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2006
(stage 1)
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The GPT Joint Venture
Following a resolution of General Property Trust (GPT) unitholders at a meeting on 2 June 2005, GPT and Babcock & Brown entered into a real estate joint venture (GPT JV) on 30 June 2005 to pursue real estate investment, trading and development opportunities worldwide, and the establishment of a listed and wholesale real estate funds management business in Australia. The GPT JV has exclusive first rights to Babcock & Browns global real estate pipeline where funded by non-Babcock & Brown Australian capital, and property and funds management activities of Babcock & Brown and GPT in Australia (excluding Japan).
On 7 June 2007, a number of changes to the Joint Venture were outlined to ensure it is well positioned to build on the success and positive momentum achieved to date. The changes resulted in the appointment of Babcock & Brown to manage the Joint Venture portfolio (Joint Venture Fund).
Babcock & Brown and GPT maintain a 50% ownership in the Joint Venture.
Babcock & Brown Residential Land Partners
On 30 June 2006, Babcock & Brown successfully listed BLP. BLP raised $175 million in the IPO. Babcock & Brown is the Manager of BLP for an initial period of 10 years. BLP listed with an initial portfolio of 10 residential land projects at various stages of development, located down the eastern seaboard of Australia.
During 2007, BLP doubled its initial portfolio from 10 to 20 residential land projects and increased the portfolio’s geographic diversification by acquairing two projects in New Zealand and four projects in Western Australia.
Through its industry knowledge, relationships with key industry participants, and its reputation amongst residential property developers, Babcock & Brown is well positioned to originate further investment opportunities for BLP.
Asian Real Estate
Babcock & Brown's Japanese real estate operations were established in 1998, concentrating on the leveraged acquisition of income producing properties and building assets under management. Babcock & Brown was attracted to this market due to its size, attractive property yields relative to the cost of funds, and the opportunity to increase returns through more pro-active and cost-effective asset management. The fragmented nature of property ownership, and the historical absence of traditional property-financing techniques led to significant opportunities for Babcock & Brown.
On 4 April 2005, Babcock & Brown successfully listed the Babcock & Brown Japan Property Trust (the Trust), the first ASX listed property trust focusing on Japanese real estate market.
As at 31 December 2007 the Trust held interests in a portfolio comprising 46 properties; 22 office, 19 retail and 5 residential properties. At 31 December 2007 total assets under management for the Trust was approximately $2.0 billion.
Babcock & Brown's Japanese operations have the same general mix of advisory and investment activities as the Australian Real Estate business, although the Japanese business has more recently focused on syndication rather than use of the Group's capital to finance transactions.
Thakral Corporation Limited
In April 2007, Babcock & Brown acquired a 9.5% stake in Thakral Corporation Limited, a listed Singaporean entity, with cash reserves of approximately S$150 million (A$119 million) and strategic shareholders, Hong Leong Group and the Thakral Family. Babcock & Brown has board representation and through this investment expects to obtain access and exposure to property investments and opportunities across Asia.
US Real Estate
In March 2006, Babcock & Brown announced the acquisition of an equity interest in a circa $1.26 billion portfolio of multifamily properties in the southern US. The portfolio was acquired by a syndicate of institutional investors led by Babcock & Brown. Babcock & Brown also arranged and structured mezzanine funding for the transaction. Babcock & Brown has also acquired a portfolio of existing self-storage facilities in addition to development activities in this asset class.
During 2007 Babcock & Brown completed the acquisition of all of the common stock of BNP Residential Properties Inc (BNP) in a transaction valued at approximately US$833 million (approximately A$1,041million).
Babcock & Brown's primary interest in BNP is its high quality apartment portfolio of 8,180 apartment units in North Carolina, South Carolina and Virginia, with an average age of 14 years, which it owns and operates. The overall portfolio occupancy is currently over 95% and rental rates are experiencing strong growth from continuing improvement in market conditions.
Following completion of the BNP acquisition, Babcock & Brown’s multi family property portfolio comprises in excess of 28,000 units across nine states in the US with a more diversifi ed and strengthened presence in the south east and a maintained focus in the high job growth Sunbelt states.
The BNP asset management platform, now rebranded Babcock & Brown Residential, is progressively assuming asset management responsibilities for the Alliance portfolio of multi family dwellings which were acquired in 2006.
On 17 May 2007, Babcock & Brown announced the acquisition of Gregory Greenfi eld & Associates, Ltd. (“GG&A”), a US-based regional mall owner and operator, as well as a portfolio of eight regional malls currently managed and controlled by GG&A. Included in the Babcock & Brown acquisition of GG&A is the asset management role for six additional malls in GG&A’s portfolio currently owned by third party investors. The transaction was completed on 10 August 2007, with the GPT joint venture acquiring a 51% stake in the retail portfolio.
Following completion, the management of Babcock & Brown’s existing portfolio of US retail properties is expected to be transferred to the GG&A platform.
Babcock & Brown Residential Land Partners
On 30 June 2006, Babcock & Brown successfully listed BLP. BLP raised $175 million in the IPO. Babcock & Brown is the Manager of BLP for an initial period of 10 years. BLP listed with an initial portfolio of 10 residential land projects at various stages of development, located down the eastern seaboard of Australia.
Susequent to listing, BLP has announced the acquisition of a controlling stake in Links Living's partnership interests in two master planned residential developments in Melbourne, Sanctuary Lakes Resort and Sandhurst Club.
Through its industry knowledge, relationships with key industry participants, and its reputation amongst residential property developers, Babcock & Brown is well positioned to originate further investment opportunities for BLP.
European Real Estate
The Babcock & Brown Real Estate Group established a dedicated presence in the UK in 2001 and more recently in Continental Europe with an initial focus on Spain, Italy, France and Germany.
Like the Real Estate Groups expansion into Japan in 1998, the development of the European business has been based on the successful Australian principal investment model.
Babcock & Brown's expansion into continental Europe was only commenced in late 2003 with the acquisition of a portfolio of 6,000 apartments in Kiel, Germany for approximately 170 million. The establishment of the GPT Joint Venture has facilitated the expansion of the European Property business.
In early 2004 the UK team also took the strategic step of co-establishing the first Foundation Investment Fund to provide retail investors the opportunity to invest in a leveraged, diversified portfolio of income producing properties.
The Group has two closed retail property syndicates in the UK.
Foundation Property Fund raised 8.7 million ($21.0 million) from retail investors and reached close in May 2004. The funds strategy is to invest in UK real estate assets in the office, retail and industrial sectors. The fund can borrow up to 80% of the portfolio's gross asset value. The Fund's 10% return profile seeks to provide a balance between income and capital.
Viking Fund raised 5.2 million ($12.5 million) from retail investors and reached close in July 2005. The Fund can borrow up to 90% of the portfolio's gross asset value. The Fund is able to invest into any property sector and can also invest in corporate entities, debt instruments secured against property or any other real estate related investment. It can invest in both the UK and the EU countries of Europe. The Fund's 15% return profile focuses primarily on providing capital return to investors.
During 2007 Babcock & Brown established a number of joint ventures when interests in several existing retail, residential and office portfolios in Germany and Switzerland were syndicated to third party investors. Babcock & Brown which retains an ongoing co-investment interest, has entered into agreements to manage the portfolios on behalf of the investors. The third party interest in these properties at 31 December 2007 was $2.0 billion.