SYDNEY-BASED Allco Finance Group utilised a complex international corporate structure to acquire a multi-million dollar German property portfolio, with advice coming from Mallesons Stephen Jaques.
The $565 million portfolio, comprising seven Deutsche Telecom properties, was the first major property acquisition made in Europe by Record Realty, which is managed by Record Funds Management Limited, a wholly owned subsidiary of Allco.
“[Allco] had never done a property transaction offshore before, so this was their first serious foray overseas,” lead Mallesons partner Andrew Erikson said.
Erikson travelled with Allco fund managers to Germany to conduct the contract negotiations and to oversee the work of the German law firm acting on the acquisition. This was challenging not only because of the German Civil Code, but because it coincided with the World Cup, which made travel extremely difficult. Even so, Erikson found a way to keep his spirits up.
“I went to watch Australia v Croatia in Stuttgart, which was a cracker of a game. The atmosphere in the stadium was just second to none,” he said.
One of the crucial aspects of the deal for Erikson was to ensure Australian standards for the property, corporate, tax and finance due diligence were met.
“It did throw up a few problems, in that the nature of [German] due diligence is somewhat different to the nature of our due diligence, and Allco was keen to ensure that the usual checks and balances were satisfied. Therefore, we had to push the German lawyers beyond their normal comfort zone to some extent,” he said.
Favourable UK tax law changes, which are due to come into force from 1 January 2007, will make real estate investment trusts (REITs) in the UK popular, according to Erikson. “The Australian REITs are probably the most advanced in the world, so we’re going to be relied on heavily for our expertise, I would imagine.”
Mallesons’ lawyers in Sydney, Melbourne and London were involved in contract negotiations and advice on risk management, along with establishing the corporate and financing structure. This allowed the transfer of assets from German and UK entities to the Record Realty Australian trust entity.
“Investors expect Australian fund managers to take more interest in acquiring European assets as the property investment market in Australia becomes increasingly saturated,” Erikson said.
Partners John Canning, Ken Astridge, Hal Bolitho and Erikson were supported by senior associates Simone Menz and Sally Wallwork and solicitors Jeremy Green and Ulrich Helth.