Oxford Properties to buy Investa fund stake, potentially foiling Blackstone bid

Australia’s Investa Commercial Property Fund (ICPF) has agreed to sell half of its 19.99% stake in Investa Office Fund (IOF) to Oxford Properties, the real estate arm of Canadian pension fund OMERS.

As part of the arrangement, ICPF said it will not vote in favour of Blackstone’s AUD3.1bn (€1.98bn) bid to take over IOF which was due to be held at an extraordinary shareholder meeting next week.

The move follows a number of ownership changes relating to ICPF and IOF, two large core Australian property funds. Macquarie last week acquired 50% of ICPF, at the time casting doubt over Blackstone’s bid for IOF.

Investa Listed Funds Management Limited, the responsible entity of IOF, informed the Australian stock market that its board continues to recommend that IOF unitholders vote in favour of the Blackstone proposal in the absence of a superior proposal.

However, market sources expect ICPF, now backed by Macquarie Real Estate Investments, to vote against the current Blackstone bid.

Blackstone requires 75% approval of all those who vote for its bid to cross the line, but sources predict that it will fail based on its current cash offer of AUD5.15 per security.

With major IOF shareholders still unprepared to back Blackstone, the US private equity group is expected to increase its offer, possibly to more than AUD5.20.

It has been noted in the market that even a price of AUD5.25 would still reflect a 4% discount to IOF’s net-tangible assets of AUD5.48 per security.

Oxford Properties is to buy the IOF stake at AUD5.25 per security, costing the Canadian investor AUD311m for 59m securities.

Some in the market suggested today that Oxford Properties may eventually use its stake to privatise IOF. The Canadian investor has been stepping up its investment in Australia and has confirmed that its holding in IOF would be a strategic commitment to build a sizeable commercial real estate portfolio in Australia.

Most recently, Grocon selected Oxford Properties as its as joint venture partner in its AUD1.4bn Central Barangaroo office tower development in Sydney.