Cromwell Property and Charter Hall are circling the $2.3 billion Investa Office Fund in a move likely to result in the dismemberment of the listed trust’s parent, the Morgan Stanley-backed Investa Property Group.
While the interest from these rivals may be welcomed by the fund’s investors, it deals another blow to Morgan Stanley’s hopes for a swift exit from the real estate empire it acquired in 2007, moments before the GFC hit.
The US bank was poised to sell Investa’s management rights to Mirvac in a $400m-plus deal that would have included two investment stakes in the business.
But its plans were derailed last month when IOF decided to conduct a strategic review, opening up an opportunity to rival suitors and paving the way for a break-up of Investa Property Group.
Negotiations with Mirvac then suffered a second setback after another Investa fund, the $3bn unlisted vehicle ICPF, opted to pursue an internalisation bid.
The fund has been working on a proposal to acquire the management rights with its adviser Grant Samuel.
On Wednesday, ICPF’s heavy-hitting unitholders, largely superannuation funds, will meet to decide whether to continue down the internalisation path and submit a proposal, or yield to Mirvac’s offer. A vote towards a full buyout of the management rights remains the likely option. Such a deal would also deliver control over a $2.45bn portfolio of assets Morgan Stanley recently sold to China’s sovereign wealth fund CIC.
While Mirvac has yet to bow out of the process, its chances of winning are diminishing. The group no longer retains the right to exclusive negotiations with Morgan Stanley and this uncertainty has drawn back former competitors for the management rights.
LaSalle Investment Management has held talks with Morgan Stanley again, but ICPF’s unitholders are unlikely to welcome back the Chicago property giant, as they prefer a domestic manager.
While Cromwell continues to size up its options on IOF, it is understood the group is also considering another tilt for the entire platform. The group waded into the Investa race first time round but was eclipsed by China’s sovereign wealth fund CIC, which offered $2.45bn for a directly-owned portfolio of assets.
This article first appeared in The Australian Business Review.