Investa Property Group has provided a strong signal that it will continue to do business across its $8 billion office platform in the face of speculation about its future ownership.
The group, owned by two Morgan Stanley Real Estate funds, has seen its listed trust, the $2.1bn Investa Office Fund, and its $4bn of balance sheet holdings subject to takeover talk.
But in the unforgiving wholesale property funds world, the group’s flagship trust is moving ahead and looking to raise about $300 million in equity in the wake of striking one of Perth’s largest property deals.
The Investa Commercial Property Fund has just inked a $388.5m deal to buy a half stake in landmark Perth complex QV1 from the group’s balance sheet on a yield of 7.4 per cent. The landmark tower, in a prime location in Perth’s CBD, has expansive Swan River and CBD views and is seen as a relative bargain by the fund as east coast assets trade at much tighter yields.
ICPF fund manager Peter Menegazzo said that securing the building in an off-market process gave the trust a “first mover advantage” in what remained a competitive environment for quality office buildings. Mr Menegazzo estimated that the fund had been able to pick up the tower at a yield 140 basis points higher than if it had bought in Sydney.
He admitted that Perth’s leasing market was going through “a soft patch”, but said the acquisition was very attractive as the building had a 7.8 weighted average lease term. The 42-level premium-grade tower, designed by Harry Seidler, comprises 63,964sq m of net lettable area and is 99.9 per cent occupied.
Key tenants include Chevron Australia, WorleyParsons and law firm Herbert Smith Freehills.
Investa and co-owner Commonwealth Superannuation Corporation added significant value to the tower by re-signing major tenant Chevron last year on a 10-year lease for almost half of QV1.
ICPF’s buy-in appears to reaffirm the building’s longer-term value despite Chevron committing to build a massive tower at Perth’s Elizabeth Quay waterfront development.
ICPF now has interests in 13 premium and prime-grade buildings valued at about $2.8bn and sees the Perth play partly about diversifying into Western Australia.
Last week, ICPF bought a half stake in 201 Kent Street, Sydney for $173m, giving it full ownership of the tower.
Ahead of its latest Perth and Sydney acquisitions, the fund had bought more than $313m of assets in the 2013 financial year.
Investa Office chief executive Campbell Hanan said the wholesale property fund had “made a point of setting and executing a clear strategy” and it had a strong and stable portfolio.
Investa Office still appears to be in disposal mode and is in talks to sell Brisbane’s Boeing House, potentially as a residential conversion. It has also fielded interest in Sydney’s $200m 55 Market Street property.
The executives in charge of the local platform are still hopeful that the group can chart its own destiny by building up the value of its management platform so that this is taken into account when Morgan Stanley ultimately determines its exit.