Listed South African real estate giant, Redefine Properties has committed to funding Cromwell Property Group’s tilt at the $8.9 billion Investa Property Group as one of the most competitive bidding wars in the sector’s history nears its conclusion.
Morgan Stanley, which acquired Investa at the height of last decade’s credit bubble, and its adviser, UBS, are now sifting through a handful of short-listed bidders. They are expected to reduce this latest group to two or three bidders before making a final selection.
Cromwell, advised by Bank of America Merrill Lynch, bolstered by the financial might of Redefine Properties, is well positioned to reach this last leg, sources said.
The Brisbane-based property group, headed by Paul Weightman, had already advanced to the short-list alongside global heavyweights Blackstone and Brookfield, but its funding arrangements had been unclear.
Cromwell intends to lodge a bid for the entire Investa business, excluding the land division, as well as submit offers for separate parts of the conglomerate, including the $2.5bn portfolio of balance sheet assets and the management rights to the platform, that could fetch up to $185 million, sources said. Dexus and its capital partner, believed to be Middle Eastern fund Abu Dhabi Investment Authority, are also in contention.
If successful the landlord, headed by Darren Steinberg, will rank as Australia’s major specialist office fund and would cap an extraordinary string of acquisitions since he took over the helm in November 2011.
However, the Investa deal is a far more complex proposition than Dexus’s $4bn takeover last year of Commonwealth Bank’s commercial property fund.
While the bidders are able to lodge offers for parts of Investa, Morgan Stanley’s preference is to sell the assets in one line.
Sources said Redefine had pursued the opportunity because it had been targeting offshore assets, while Cromwell was focused on expanding its management platform.
Yet as the contenders continue to conduct due diligence, concerns are likely to intensify about the stickiness of the funds management rights to Investa’s two funds, the listed Investa Office Fund and its unlisted stable mate, Investa Commercial Property Fund. The pair hold pre-emptive rights over the platform and have been excluded from the process.
However, hopes IOF will pursue an internalisation appear to have diminished. The fund’s stock price has fallen steadily in the past month, plunging from $3.90 to $3.73 reflecting mounting concerns the funds will be unable to counter an offer for the entire business.
This article first appeared in The Australian Business Review.