Brookfield’s strategy to acquire the $8.9 billion Morgan Stanley-backed Investa Property Group has taken a surprise twist.
According to sources, the Canadian fund manager plans to tip Investa’s balance sheet assets, the most desirable part of the property empire, into a newly launched fund, which will be backed by a handful of heavyweight investors.
Under the mooted deal, Brookfield will sell some of its top buildings into the vehicle, leaving it with a cornerstone stake in one of the country’s largest office portfolios.
It is a bold move and, if successful, threatens to shake up the office sector by displacing some of the power wielded by the listed players, Dexus and GPT Group.
It also marks a significant change in Brookfield’s strategy.
The Canadian powerhouse, ranked last year as the world’s largest real estate manager, is considering seeding the fund with some of its best-known skyscrapers, with the BHP’s headquarters in Perth among the blue-chip buildings on the shortlist. While a decision on the 45-level tower is yet to be made, its presence in the fund would represent a powerful drawcard for investors.
Sources said Brookfield was scrambling to form the vehicle ahead of the July 7 final bids date for Investa. It is understood the asset manager has so far locked in at least two capital partners after approaching local and offshore institutions. The identity of the investors is not known but many pointed to the Qatar Investment Authority, with which it teamed up to buy London’s Canary Wharf district, as a logical candidate.
Brookfield’s strategy swerve has caused consternation in the market with some questioning how much information the Canadian firm is revealing to its potential co-investors. Under the rules of the auction run by Morgan Stanley and UBS, the suitors, or capital leaders, are allowed to disclose sensitive information to partners. These institutions are then bound by the same confidentiality agreements.
Brookfield’s decision to form a fund comes as the jostling among the final contenders intensifies.
Investa’s portfolio of directly held assets, which carries a book value of $1.9bn, once the sale of assets to the group’s unlisted landlord, ICPF, are taken into account, is likely to fetch a 20 per cent-plus premium.
Representatives from Dexus’s main partner, ADIA, are jetting in next week to inspect the assets.
This article first appeared in The Australian Business Review.