Deals

Morgan Stanley to buy Australian real estate firm for $5.5bn

The investment bank’s property arm continues its acquisition spree with the announced takeover of Investa Properties, one of the largest REITs in Australia.

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Morgan Stanley Real Estate has agreed to acquire Investa Properties, Australia’s largest publicly traded office REIT, for A$4.7 billion ($3.9 billion; €3.0 billion). Including debt, the offer values the Sydney-based company at approximately $5.5 billion.

Under the terms of the bid, which has been unanimously approved by the Investa board, Morgan Stanley will offer A$3.08 per share, a premium of 14 percent over the company’s closing price on May 30 and a premium of 56 percent over the company’s net tangible asset value per share at December 31. According to a presentation released by the company, Morgan Stanley approached Investa in March about a potential deal. The transaction is expected to close in September.

At December 31, Investa had assets under management of A$7.0 billion, including A$4.0 billion in its office portfolio and A$1.7 billion in its externally managed funds business. The company also has a residential and commercial development platform. In the six months ended December 2006, the company generated revenues and EBITDA of A$825 million and A$369 million, respectively. Investa’s office portfolio contributed 85 percent of the company’s earnings over the same period.

As in many major markets around the world, the office sector in Australia has benefited from a surge in rents. According to figures from Jones Lang LaSalle, office rents in the central business districts of Sydney, Melbourne, Brisbane and Perth have increased by 14 percent, 9 percent, 32 percent and 56 percent, respectively, from December 2005 to December 2006.

Two years ago, Morgan Stanley and GIC acquired the Chifley Tower in Sydney, one of the city’s premier office buildings.

Morgan Stanley’s announced acquisition of Investa continues the bank’s recent activity in the global real estate markets. On May 22, Morgan Stanley agreed to purchase US office REIT Crescent Real Estate Equities for $2.3 billion. A week earlier, the firm announced its first investment in the Polish real estate markets, acquiring a 25 percent stake in WAN SA, a Warsaw-based property developer.