Australia's Investa Property Group Plans IPO or Takeover

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Already holding $7.9 billion of managed assets, Investa Property Group officials say they want to increase that amount shortly. The Sydney-based company, owned by Morgan Stanley since 2007, says it is considering an initial public offering or a takeover of a public company trading at a discount.

Investa is raising capital for its unlisted wholesale fund to buy quality office assets in the Australian market which is set for a significant recovery, Investa CEO Scott MacDonald told Reuters.

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Scott MacDonald

"We intend to go public when the timing is right;" MacDonald said "There will come a point in the distant future where some of the investors want to get their money out. And being in the public space, it's easier to do that."

MacDonald added, "The other alternative, that we will look at and we do periodically, is if there is a public company that is trading at a big discount, and we think it could make sense as a future public platform for us, we will take a look at trying to take control of it through M&A (merger and acquisition) activity."

AMP Capital Investors, a unit of Australia's No.2 wealth manager AMP (AMP.AX), is raising money for its open-ended property and Asian equity funds.

Investa's wholesale fund, Investa Commercial Property Fund (ICPF), is currently seeking to raise between A$300 million to A$400 million, MacDonald said.

"We hope to have indications of interest by mid August," he said, adding preliminary feedback had been strong.

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Campbell Hanan

Investa Group Executive Campbell Hanan says cap rates, or returns on investment properties, on good commercial office assets were 90 to 100 basis points above the historical average, indicating yields will likely compress and asset values rise.

Hanan said Australian office vacancies had started to peak, setting the stage for rental growth, while supply remained limited as current low rents did not justify new construction.

"All these ingredients are pointing to a good recovery," he told Reuters.  He says investors could get an internal rate of return (IRR) of 10 to 13 percent.

Hanan forecast high single-digit growth in effective rental growth over the next four years for Sydney's central business district and mid-to-high single-digit growth for Melbourne.

 

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