Settlement Delay and Payment Deferral Risk Cloud Australian Unity’s Office Fund Sale
Australian Unity Investment Real Estate Limited updates on the sale of 150 Charlotte Street, Brisbane, revealing deferred settlement and a proposed alternate payment structure that clouds timing and cash flow certainty.
- Sale contract for 150 Charlotte Street exchanged in April 2024 at $61.5 million
- Settlement deferred from April to August 2025 with net sale price increased to $63.5 million
- Purchaser proposes alternate settlement with 50% payment deferred up to two years
- No confirmation yet from purchaser on full settlement ability under existing terms
- Distribution guidance based on original settlement timing remains subject to risk
Background on the Sale
Australian Unity Investment Real Estate Limited (AUIREL), the responsible entity for the Australian Unity Office Fund (ASX, AOF), has provided an important update regarding the sale of its Brisbane commercial property at 150 Charlotte Street. The contract for this asset was initially exchanged in April 2024 for a net sale price of $61.5 million, with settlement originally scheduled for April 2025.
Settlement Deferral and Price Adjustment
Following a request from the purchaser, settlement was deferred by four months to August 2025. In return, the net sale price was increased to $63.5 million, reflecting a modest premium for the delay. Both parties have complied with their contractual obligations to date, maintaining the validity of the agreement.
Emerging Payment Structure Concerns
More recently, the purchaser has proposed an alternative settlement arrangement. This proposal would see only half of the sale proceeds paid immediately at settlement, with the remaining 50% deferred for up to two years. While this structure could provide flexibility for the buyer, it introduces uncertainty for Australian Unity regarding the timing and certainty of cash flows from the sale.
Lack of Confirmation and Market Implications
Crucially, AUIREL has sought urgent confirmation from the purchaser that they remain capable of settling the full amount under the original terms in August 2025. To date, no such confirmation has been received. This ambiguity casts a shadow over the previously issued distribution guidance, which was predicated on a full and timely settlement.
Looking Ahead
AUIREL has committed to ongoing engagement with the purchaser, balancing contractual rights and obligations while keeping the market informed. Investors and analysts will be watching closely for further updates, as the final settlement terms will have direct implications on the fund’s cash flow and distribution outlook.
Bottom Line?
The unfolding settlement uncertainty at 150 Charlotte Street signals a pivotal moment for Australian Unity’s distribution forecasts and investor confidence.
Questions in the middle?
- Will the purchaser confirm full payment capability under existing contract terms by August 2025?
- How might a deferred payment structure impact Australian Unity Office Fund’s cash flow and distributions?
- Could this situation foreshadow broader market challenges in commercial property transactions?
