The independent directors of the Investa Commercial Property Fund have drafted in boutique advisory firm Grant Samuel to provide counsel as it prepares a proposal to acquire the $8.9 billion Investa Office platform.
The involvement of the well-connected corporate adviser adds some heft to moves by ICPF to present a fully fledged internalisation plan to investment bank Morgan Stanley, whose real estate funds arm is selling the office management business.
Morgan Stanley is understood to have granted ICPF partial access to due diligence materials on the management business on the proviso it will gain further information if a serious proposal is put up.
The play by ICPF, while still in its early stages, could benefit from Grant Samuel’s involvement as the finance house has played a role in some of the year’s largest property deals. It provided advice to apartment tsar Harry Triguboff on the value of his Meriton empire as he considered a sale to Chinese interests, and it also undertook corporate work, including a fairness opinion for Novion Property Group ahead of its merger with Federation Centres
ICPF is thought to be hopeful that a short process, in which it develops an internalisation plan, which can then be weighed up by its investors against the alternative of a sale of the platform to the listed Mirvac Group, can be undertaken. ICPF’s $3bn portfolio includes coveted office assets, including an interest in Sydney’s Deutsche Bank Place.
The fund’s process has cast a spotlight on the hurdles that Mirvac’s $400 million-plus bid for the platform, which includes the management of the listed Investa Office Fund, and the running of a portfolio of towers sold to Chinese sovereign wealth fund China Investment Corporation for $2.45bn, must overcome.
Some investors in the unlisted and listed Investa funds remain concerned about the potential conflicts Mirvac would bring if it bought the platform. While Mirvac has not been rejected by the funds, both sets of investors rate Investa’s management highly and would like the group to stay intact.
IOF investors appear open to the vehicle, which has a market capitalisation of $2.2bn and is advised by Fort Street and Macquarie Capital, supporting its unlisted stable mate in making an internalisation bid.
Folkestone Maxim Asset Management managing director Winston Sammut said keeping the platform together “would be a positive; they have done a good job”. While there are uncertainties inherent in a deal in which wholesale investors acquire a major property funds management business, Mr Sammut said an ICPF-led internalisation was feasible. “It depends on whether or not Morgan Stanley agree and accept it.”
The bank has already rejected a proposal from IOF and instead pursued a process in which Mirvac was selected ahead of US giant LaSalle Investment Management.
Morgan Stanley, advised on its exit from Investa by UBS, “continues to run an orderly process” a spokesman said.
This article first appeared in The Australian Business Review.