This article is from the Australian Property Journal archive
PRIVATE equity is circling the stable of Australian LPTs and analysts say Morgan Stanley's $4.7 billion takeover bid for Investa, is just the beginning.
Yesterday, Morgan Stanley Real Estate which manages over $US55.6 billion in real estate assets, has made a $3.08 cash offer for all securities in Investa – which is approximately 14% over Investa’s closing price of $2.69 at May 30, 2007.
The bid gives Investa, which listed in May 1992, an enterprise value of $6.6 billion. The offer has received the unanimous support from Investa’s board of directors – in the absence of a superior proposal.
Investa’s chairman Steve Crane said the offer was an attractive opportunity for securityholders to lock in certain value for their holdings.
Armytage Property Management’s investment director John Welch said the privatisation of Investa will not be the last.
“In 2004, the number of listed property companies/trust diminished through consolidation. But this time round, I predict there will be less LPTs on the Australian Stock Exchange through privatisations,” he added.
In February this year, the Roberts Family and Brookfield Asset Management launched a $4 billion takeover bid for Multiplex and last month ProLogis made a $1.24 billion for Macquarie ProLogis.
Also, this is not the first time Morgan Stanley has dabbled on an LPT. In February this year, Morgan Stanley’s subsidiary Kara Investments in a joint venture with Singapore’s Tuan Sing took over Grand Hotel Group for $330 million.
Welch predicts a few LPTs could be on menu including Macquarie DDR Trust and Rubicon America Trust.
He said there are a number of factors making Australian LPTs attractive to global investors.
“Borrowing rates are up in the United States and yields are also tightening. Australia has the highest yield property trust market in the world and while yields have come down to around 5.3% to 5.8% – it is still attractive internationally,” he added.
“Also, this is deal is similar to Blackstone Group which bought out Equity Office Properties Trust in the US for $US36 billion,” Welch said. “So, Australian LPTs are a bargain from a global markets perspective.”
In addition, Welch said Australia’s third largest property trust has one of the best office portfolios, with an 80% interest in Centennial Plaza in Sydney, 50% in BT Tower and 30% in Grosvenor Place.
“If Morgan Stanley decides to offload these Prime and A Grade office assets, there will not be a shortage of potential suitors,” he added.
The takeover deal does not include the external wholesale and retail property funds managed by Investa, which has its own unitholders.
Investa currently manages nine retail property funds with a combined value of approximately $685 million as well the flagship Investa Commercial Property Fund, a wholesale fund with assets of approximately $700 million.
There is also the Investa Diversified Office Fund, which was born from the recent merger of the Investa Fourth Commercial Trust with $52 million assets under management, Investa Fifth Commercial Trust with $134 million AUM, Investa Sixth Commercial Trust with $120 million AUM and Investa Brisbane Commercial Trust with $32 million AUM.
Investa does hold cornerstone investments in those funds and it is unclear whether Morgan Stanley, which manages $US55.6 billion in real estate assets, will sell off the interests in those trusts.
Meanwhile, Crane said although Morgan Stanley Real Estate had indicated its wish to retain Investa’s management team, no ongoing remuneration arrangements for the team have been agreed upon.
He said that this was work to be undertaken as appropriate later in the process. However, he did indicate that Investa has put in place additional retention arrangements for senior executives.
Crane also said that Investa chief executive John Arthur had asked not to participate in any new retention payment arrangements.
Shares in Investa closed an all time high yesterday, up 41 cents or 15.24% to $3.10.
Australian Property Journal
