Morgan Stanley’s Investa Property Group has been swamped by prospective bidders for its $8.9 billion commercial real estate empire with close to 40 separate parties circling the business in what will rank as one of the largest property deals this year.
GPT Group, the New York private equity group, Blackstone, and Canada’s Brookfield, are among the many names that have already signed confidentiality agreements to access Investa’s data room, which opened today.
However the terms of entry have sparked objections from some listed suitors.
According to sources two large-scale Australian Real Estate Investment Trusts have refused to sign the confidentiality agreement on the basis that it precludes bidders from purchasing shares in Investa’s $2.5bn listed office landlord, IOF, for a certain period of time.
They have argued the restrictions are senseless, partly because the fund, run by manager Ming Long, has been locked out of the process. IOF, along with its unlisted stable mate, the blue chip office vehicle, ICPF, are unable to vet or negotiate with potential suitors to the platform.
Instead Morgan Stanley, which acquired Investa at the peak of the credit bubble, has invited pitches for the entire business, enticing in a host of offshore bidders eager to gain a sizeable platform in Australia that would offer ownership and management rights over some of the country's top skyscrapers, including Deutsche Bank Place in Sydney.
The falling Aussie dollar, which has slipped close to 30 per cent from its peak has also galvanised international investors’ appetite.
The sheer number of suitors means Morgan Stanley, and its advisers, UBS, are unlikely to capitulate to demands to alter the terms of the confidentiality agreement.
Most of the domestic listed players are expected to enlist financial help from heavyweight capital partners although these formations may change by the time a shortlist of bidders is drawn up in mid April.
While Blackstone and La Salle Investment Managers are ranked among the strongest contenders, a string of international pension funds and sovereign wealth funds will sift through the due diligence material.
Canada’s PPIB however, which bought a stake in Commonwealth Bank’s former office landlord, CPA alongside Dexus, is tipped to stay clear of the race.
One source stressed that few unlisted investors will agree to exclusive partnerships since this would limit their chances of making it to the next phase, which will reduce the field to between six and 10 bidders.
There are some logical partnerships, including one between global fund manager, Invesco, China’s CIC. The two recently snapped up a Sydney office block from Investa for over $300 million.
Australian Super and QIC are also expected to feature in one consortium, while Canada’s PSP, may team up with Charter Hall Group, given its investment in the listed trust’s blue chip office fund.
Yet while the doors have been flung open on the data room, the conclusion to this deal is far from clear.
This article first appeared in The Australian Business Review.