Tony Pitt’s boutique funds manager 360 Capital Group has taken another step towards launching a takeover play for Allan Fife’s Australian Industrial REIT, which would allow him to create an $800 million industrial fund.
Mr Pitt’s boutique funds manager, 360 Capital, yesterday revealed it had boosted its stake in the rival industrial property fund from 7.7 per cent to 12.9 per cent, but both groups were coy on their plans.
Mr Pitt’s group has poured $27m into building its stake and analysts believe the move could be a precursor to a proposal to merge the two trusts under the 360 Capital umbrella.
The expected move puts mergers on the agenda for the Australian real estate investment trust sector next year.
Folkestone Maxim Asset Management managing director Winston Sammut said: “Corporate action is going to take place in those stocks that don’t have a cornerstone investor or that are not tied into a larger entity.”
Fife Capital has a small stake in the trust it manages and its performance lagged earlier this year after it tapped the market to back an acquisition. Investors are thought to have rebuffed plans for another raising to add to the $308m portfolio. By contrast, the Pitt-run 360 Capital Industrial Fund last month unveiled a 4.2 per cent upgrade to its fiscal 2015 distributions on the back of high occupancy levels. The 360 fund’s portfolio now sits at 21 properties worth $501.6m.
Folkestone’s Mr Sammut noted the potential for mergers even as valuations of many A-REITs were “not cheap”, saying acquirers would target stocks with open registers, and where they could cut costs.
A move by 360 Capital would allow it to seize more industrial property at a time when the direct market is running hot.
Rather than competing against Propertylink, Logos Property and Charter Hall Group’s network of funds for assets, the fund manager could target the Fife portfolio as few competitors could buy a listed group.
Next year is promising more portfolio sales with the $65m-plus McPhee logistics assets in due diligence through Colliers International and US-based Equity Commonwealth tipped to bring a $200m mixed portfolio to market likely through JLL.
A larger 360 Capital-run industrial fund could better compete against the foreign players chasing assets as well as sector giants Goodman Group, Dexus Property Group, Stockland and Mirvac, for passive assets, if a merger went ahead.
Separately, the 360 Capital Office Fund has snapped up an office complex in the Botanicca Corporate Park in Melbourne’s inner-city Richmond. The fund paid $46.5m for the building, via CBRE and Colliers International.
This article first appeared in The Australian Business Review.