ASIA NEWS: Back to business

With the question of its long-term ownership now settled, the Investa Property Group is wasting no time in getting back to business as usual.

In fact, it is targeting a capital raise of A$400 million ($296 million; €264 million) in order to fund a number of committed acquisitions and developments in its home market of Australia.

 The capital raising follows more than a year of uncertainty and disruption for the Sydney-based property company, as its former owner Morgan Stanley Real Estate Investing began to exit the business. The uncertainty was finally resolved in mid-April, when shareholders voted down a proposal from Dexus Property Group to take over the listed Investa Office Fund (IOF).

According to Peter Menegazzo, chief investment officer at Investa, there should be no further upheaval now that Investa owns the rights to manage the Investa Commercial Property Fund (ICPF) and IOF. Investa acquired the Investa Office Management Holdings – the entity that controls the fund management platform – from Morgan Stanley for A$90 million in February.

The key concern of investors throughout the tumultuous period, explained Menegazzo, was that management remain intact and not be folded into another property group, so they were happy with the outcome.

“The base of the business is secure and we have a strong support from our investor base,” he said.  “That's again demonstrated not just through the approval to acquire the management platform but also in the recent capital raising.”

Menegazzo added: “We are back to business. Performance has been good and the team is focused on delivering performance and growing income and asset values.”
The firm's ICPF returned 12.3 percent over two years and 10.1 percent over five years, outperforming the Mercer-IPD Australia Unlisted Wholesale Property Fund Index, which is Australia's benchmark index. The index actually ranked ICPF as the country's top performing unlisted core fund in 2015.

The new capital raising is designed to bring the debt ratio of ICPF to the lower end of the firm's strategic range of 15 percent to 25 percent as it embarks on acquiring more assets later this year.

Investa has received interest from existing investors as well as new investors that either have already committed to the fund or are at varying stages of due diligence, PERE understands.

Next up for the firm is a landmark development with a value of nearly A$900 million in Sydney's central business district. Investa also recently acquired 420 George Street, a grade-A building in Sydney, from Fortius for A$442.5 million.

Investa made these investments via the open-ended ICPF which concentrates on prime grade office assets in the major Australian east coast markets. The fund has A$3.3 billion in assets under management across 13 investments.

“Our big core fund doing the developments has a good, strong income profile and has a capacity to take a little bit more risk through development in order to create product to hold for the long term,” said Menegazzo.

Development is a play that Menegazzo likes due to the current frothiness of the Sydney market. He noted that there is not much construction expected in the market between now and 2020. Meanwhile, real estate demand has been fairly solid, which has led to net effective rental growth, he said.

“In terms of supply and demand, Sydney is definitely looking like the peak of the market,” he explained.