NextDC still pushing to wind up Asia Pacific Data Centres Trust

Court deems majority owner 360 Capital eligible to vote on whether the Asia Pacific Data Centres Trust is to be wound up.
Written by Asha Barbaschow, Contributor

Datacentre services firm NextDC is set to continue its stoush with Asia Pacific Data Centres (APDC) and majority owner 360 Capital, telling shareholders in a statement on Monday that it is still seeking to wind up the APDC Trust.

NextDC and APDC have been involved in an ongoing tussle after ownership of the latter was switched to 360 Capital in November.

With its annual general meeting scheduled for Friday, after being adjourned since January, NextDC said it "recommends that all APDC security-holders eligible to vote on the resolution vote in favour of the resolution" to dissolve the trust.

NextDC owns a 29.2 percent interest in APDC and currently leases place at three of its datacentres in Perth, Sydney, and Melbourne -- known as P1, S1, and M1, respectively.

NextDC is APDC's sole tenant at all three sites.

360 holds a 67.3 percent interest, with the balance shared among other investors.

On Friday, the Supreme Court of New South Wales determined that 360 is not an associate of APDC and is therefore eligible to vote on whether or not the trust should be wound up. NextDC said it is currently considering whether to appeal the decision.

NextDC has been pushing to have the real estate trust underpinning APDC wound up since December, stating it is unhappy with the direction 360 Capital is taking the company under its steerage.

NextDC said on Monday that actions taken by both 360 and APDC has strengthened its belief that the APDC Trust is not being operated with sound governance practices and that winding up of APDC Trust remains the appropriate course of action.

APDC agreed in February to wind up its Trust if it secured a buyer for its properties.

The APDC Group has failed to secure any binding offers for any of its APDC assets, however, putting three separate preemptive offers to NextDC, all of which were rejected.

APDC in late December pitched a sale price of AU$300 million for the three datacentres to NextDC, pointing to the sale of Metronode to Equinix for AU$1 billion as its reasons for the valuation.

NextDC struck out at the valuation, stating that Metronode is a datacentre operator, not a real estate trust, and said the offer "has no logic and is simply incorrect".

APDC in February made NextDC a AU$280 million offer with the property trust of APDC explaining at the time the multimillion-dollar figure equates to a 5 percent initial yield and a premium of AU$67.2 million -- or 31.6 percent -- to the last valuation.

This was followed in April with a AU$265 million gentleman's agreement between APDC and NextDC CEO Craig Scroggie.

It was later revealed that the Australian Securities and Investments Commission (ASIC) had conducted enquiries in April into the potentially misleading director valuation of APDC's portfolio and has left the case open to determine if APDC complied with its obligations under the Corporations Act.

In the process of attempting to sell its assets, APDC took NextDC to court to request the latter stop blocking potential buyers.

APDC argued in April that as a result of NextDC executing what it believed were its rights of first refusal under the datacentre leasing arrangement, APDC lost a prospective purchaser.

Rejecting the idea that APDC had an acquisition fall away as a result of blocking actions made by the defendant, counsel for NextDC highlighted the security requirements of the data stored within the three datacentres in question and said a handful of clauses in the arrangement between the pair details limited rights to access for third parties as a result.

NextDC at the time agreed to allow a prospective purchaser to visit the sites on the condition the prospective purchaser agreed that it would be fronting at least AU$265 million if the sale was to proceed.

Barristers for both parties took 90 minutes to settle the dispute, which resulted in NextDC agreeing to allow one unnamed third party, highlighted as the prospective purchaser, to inspect the three sites, providing written notice is produced 24 hours ahead of the visits.

No sale was executed and the battle over access continued into September, with the ruling in favour of NextDC.

In the judgement delivered, it was stated: "There is not now, and there has not to date been, any assertion of conduct on behalf of the tenant which has either been not in good faith or not reasonable".

NextDC was on Friday awarded costs relating to the battle.

APDC on Monday said it has formally withdrawn the properties from the market and will instead be pursuing its growth strategies.

"APDC looks forward to a positive working relationship with NextDC," it added.


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Counsel for both parties have agreed that NextDC will allow a prospective purchaser to inspect the three sites it currently leases off APDC, providing written notice is received 24 hours beforehand.

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