ASIA NEWS: A sale of high pegging

In the weeks before Morgan Stanley Real Estate Investing (MSREI) announced the commencement of the sale process for its Australian property company, Investa Property Group, speculation was rife.

Now announced, a fierce bidding competition for the business, originally acquired by MSREI for A$6.6 billion (€4.5 billion; $5.14 billion) before the global financial crisis, is expected to ensue. And the list of prospective suitors is materializing fast.

According to local reports in Australia, a veritable who’s who of the private real estate investment world is showing interest. Among them are: The Blackstone Group, LaSalle Investment Management, GIC Private, Abu Dhabi Investment Authority, Charter Hall Group and Dexus Property Group. The list is expected to get bigger still.

That is of little wonder as the sale is pegged to be one the largest involving a property company that the country has ever seen.

The scale of the portfolio at stake justifies the heated competition. However, contrary to speculation, a source close to the deal told PERE that Morgan Stanley has no compulsion to sell within this year. And so its exit could become protracted.

MSREI too is tempering expectation. As regularly is the case when corporate sale activity is on the cards, the language adopted in its announcement was deliberately couched so as to not detail exactly how the business could be sold off, or indeed what options it was exploring. 

Under the headline: “MSREI commences Investa Property Group sale process” it said it had appointed its own investment bank and the Swiss investment bank UBS “to explore strategic alternatives around its holding in Investa Property Group”.

Investa is a business responsible for two units: Investa Offices and Investa Land. The Investa Office business incorporates the Investa Property Trust, which controls about A$2.5 billion of balance sheet-held assets, and an office management platform called Investa Office Management Holdings, which provides property management services for more than A$8.9 billion of assets. 

The office platform includes fund management, portfolio and asset management functions, which, besides being provided to the Trust, are also provided to listed investment vehicles Investa Office Fund, which has A$3.1 billion of assets, and Investa Commercial Property Fund, which has A$2.4 billion of assets. 

“Prospective bidders for IPT will be offered the opportunity to secure the management services of the office platform, thereby benefitting from its scale, expertise, deep market knowledge and tenant relationships,” MSREI said.

Investa Land, meanwhile, is a land development business with 14 projects, located predominantly on the east coast of Australia and which are valued at about A$2.6 billion.

MSREI has already been in divestment mode of late in Australia. At the turn of the year, it offloaded another property investment management company, Orchard Capital Investment. That deal had a shorter hold period and provided MSREI with a 20 percent-plus IRR, though it was of smaller scale.