Morgan Stanley’s Arena exits part portfolio for A$249m

The Melbourne-headquartered firm has exited five directly-held properties from its two real estate funds, which are in the process of being fully liquidated.

Morgan Stanley Real Estate Investing-owned Arena Investment Management has sold a portfolio of five real estate assets in Australia to Sydney-headquartered boutique investment house Anton Capital for A$249.3 million (€171.52million; $202.45 million). The deal effectively sees its funds fully exited.

Anton Capital is said to have acted on behalf of an institutional investor, although the identity of that investor was not revealed.

The divestment was made from the Arena Property Fund (AOF) and the Arena Office Fund (AOF) which, since September 2014, have been in the process of being liquidated following a six year-long period of the funds being frozen for investor redemptions.

The assets include a business park in Auckland and the Victoria Police Station in Melbourne along with two properties in Sydney and one in Fremantle in Western Australia.

“The sale of residual direct property assets in APF and AOF will be the culmination of a three year turnaround program implemented by Arena that has delivered strong returns to investors, within both the Arena Property Fund and Arena Office Fund, and which will lead to a full liquidity event in accordance with the December 2011 strategy plan,” David Ross, chairman of Arena said in a statement.

In 2011, Morgan Stanley bought the then-called Orchard Capital Investments and renamed it Arena Investment Management. As part of the restructuring, Morgan Stanley began the recapitalization of the three key funds in Arena’s portfolio – APF, AOF and Chevron Renaissance Property Trust (Chevron) – which had struggled to make exits in the advent of the global financial crises.

APF was the firm’s flagship fund launched in 1992, with investments in office, retail and industrial assets apart from other unlisted funds. The gross asset value of the fund as of August last year was A$150 million. AOF, established in 2005, had investments in office properties in Australia and New Zealand totaling A$343 million.

Together with Chevron, which was invested in one retail shopping centre in Queensland, the three funds comprised in total nine real estate assets. According to the statement released during announcement of the liquidation process last year, the entire divestment process should be worth around A$500 million in value.

Property broker, Jones Lang LaSalle acted on behalf of Arena, with Chris Key, head of corporate finance at JLL and John Talbot, managing director – advisory and consulting services for the firm in Australia being the main people involved in the process.