Investa Property Group is seeking to raise new capital for its flagship real estate fund, following months of ownership upheaval and uncertainty.
As the dust settles on the failed takeover of the Investa Office Fund, the Sydney-based company has turned its attention to raising AUD400m (€258m) for Investa Commercial Property Fund (ICPF), an unlisted vehicle for non-retail investors.
Investa endured a protracted period of uncertainty as its owner Morgan Stanley Real Estate Investing began to exit the business, attracting takeover bids for various parts of the company.
The latest chapter ended in mid-April when unit-holders voted down a proposal from Dexus Property Group to merge with the listed Investa Office Fund.
Despite the uncertainty, investors in ICPF have shown support by remaining in the fund and committing more capital.
Peter Menegazzo, Investa’s CIO, told IPE Real Estate: “We are pretty well progressed [with the raising] and very pleased with the level of support from existing investors.”
He confirmed the fund was halfway to being fully subscribed, with support from existing investors.
“Last week, we started conversations with prospective new investors,” he said.
“Two have already committed, and others are in due diligence. We expect to hear from them in the coming month.”
ICPF raised AUD580m in April last year.
Menegazzo said the new capital-raising would bring its debt ratio to the lower end of the trust’s strategic range of 15-25%.
ICPF has been active in acquiring new assets and is in the process of settling some of these transactions.
“We have been fortunate in being able to acquire good-quality assets in the last few months,” Menegazzo said.
The most recent acquisition is 420 George Street, a grade-A building in Sydney’s central business district, for AUD442.5m, from Sydney fund manager Fortius.
When Morgan Stanley sold the Investa Property Trust to China Investment Corporation (CIC) for AUD2.45bn last year, there was a carve-up of some assets jointly owned by the various Investa funds.
Mirvac Group, a listed Australian REIT, now manages the CIC portfolio.
Menegazzo said ICPF took over stakes in two buildings in Sydney from CIC for a total of AUD280m.
In one case, this gave it 100% ownership of an office building.
ICPF continues to hold co-investments with CIC, including the blue-chip towers of Deutsche Bank Place and 400 George Street in Sydney, and 120 Collins Street in Melbourne.
ICPF also has co-investments with its sister trust, the Investa Office Fund.
Menegazzo said all its acquisitions were well supported by its investors.
“One of the things we are really proud about is the fact that, through the whole Morgan Stanley sale process and the IOF-DEXUS takeover proposal, the fund continued to perform very strongly,” he said.
“We had a liquidity event last November, and we did not get one redemption request. So that was a very strong outcome for our business.
“While there were concerns around the noise in relation to that sale, our assets continued to perform very strongly, and investors stood behind us.”
The Australian industry benchmark index – the Mercer-IPD Australia Unlisted Wholesale Property Fund Index – ranked ICPF as the best performing Australian fund in 2015.
The fund returned 12.3% over two years and 10.1% over five, outperforming the index.
Industry sources told IPE Real Estate the performance of the fund and the quality of its management were the main reasons ICPF investors were resolved to protect its independence.
The key concern of investors was that the management remained intact and not be folded into another property group.
This meant they were happy for the management to spend AUD90m to acquire Investa Office Management Holdings from Morgan Stanley.
The entity – which was also hotly contested among suitors – owns the rights to manage ICPF and IOF, as well as the control of the management platform.
“When we sought a vote for stapling and acquisition, we had unanimous support,” said Menegazzo.
“Of those who voted, 100% were in favour of both the acquisition of the management platform and the stapling of ICPF to IOF.”
The reason, he said, was that ICPF investors liked the specialisation of the fund and the capability of its platform.
“They don’t want to see that diluted,” he said.
Menegazzo declined to discuss ICPF’s investors, but IPE Real Estate understands they include VFMC, the AUD50bn fund that looks after the public sector pensions of Victoria.
Others are said to include the Dutch pension fund group PGGM and Swedish state pension fund AP1.
All told, IPCF has 50 investors from Australia, Asia and Europe, with foreign investors making up 30% of its investor base.
ICPF’s portfolio was valued at AUD2.8bn at the end of 2014.
With the latest acquisitions, it is expected to grow to AUD4.3bn.
