China Investment Corporation’s $2.45 billion outlay on Investa’s portfolio of Australian skyscrapers has revived expectations the sovereign wealth fund will shed its $1bn-plus exposure to listed warehouser Goodman Group.
While the Chinese heavyweight is not short on capital — its total assets under management climbed by $US93bn ($127bn) to $US750bn last year — the fund dislikes stakes in publicly owned property managers.
The purchase of the Investa portfolio, announced on Monday in a deal first flagged by this column, reflects a strategy, laid out many years ago, to rotate into direct real estate.
In 2012, CIC offloaded a 6.9 per cent slice in Sydney-based Goodman Group, crystallising a profit on its initial and much larger investment, which was made in the midst of the global financial crisis.
Goldman Sachs executed the $518 million block trade and since then the bank has been the favourite to sell down the remaining 10 per cent stake. However, some in the market now believe Morgan Stanley is the most likely contender. The ties between the US bank and CIC run deep.
The sovereign wealth fund, which proved a white knight for Goodman Group, also helped prop up Morgan Stanley when the developed world’s financial system threatened to collapse.
CIC pumped $US5.6bn into Morgan Stanley in 2007 just after the fund’s formation, and under the terms of that deal it’s exposure swelled to more than 10 per cent when equity units converted into publicly traded stock. CIC has also been a heavy backer of Morgan Stanley’s real estate business, ranking as the largest investor in both MSREF VII and MSREF VIII, the bank’s latest property fund that is still raising money from investors.
The nexus between the fund and the bank has also led some to question what influence it may have on the sale of Investa’s management platform, which runs the now CIC-owned portfolio as well as the listed fund IOF and the unlisted ICPF vehicle.
This article first appeared in The Australian Business Review.