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Why timing is right for Mantra acquisition of Outrigger: Pitcher Partners’ David Lane

Posted on Mar 19, 2015

Outrigger Acquisition by Mantra Group (MTR), Thursday, 19 March 2015

Mantra Group (MTR) today announced the acquisition of Outrigger, together with an equity raising.

The timing of the acquisition is right, as there are signs of an improvement in domestic tourism as a result of the softer AUD.  Although trends are improving, property prices on the Gold and Sunshine Coasts are still relatively depressed compared to the recent hype in Sydney, Melbourne and Brisbane apartments.

The Outrigger properties are well located, and will complement Mantra’s existing portfolio of 113 properties.  It is likely that Mantra will be able achieve long-term cost savings through economies of scale and marketing opportunities with Outrigger becoming part of the larger group.

Encouragingly, Mantra management have chosen to fund the deal with an equity raising.  Although debt funding is cheap with low interest rates, it seems that REIT managers have learnt the lessons from the GFC of carrying too high debt levels.  Mantra group currently has net gearing of 30.6%, which is manageable.  Assuming the equity raising is successful, the balance sheet for the group will remain prudent.

Comment from David Lane, director of Wealth Management at Pitcher Partners