Trust reports to lift lid on mergers

7 February 2017

Publication: The Australian
Author: Ben Wilmot
Date: 7 Februiary 2017

Trust reports to lift lid on mergers

The real estate investment trust reporting season is shaping as a key marker for property mergers that could top $5 billion across the office and retail property sectors.
The season begins today with a report from SCA Property Group, which is expected to update investors on its intentions on the 4.9 per cent stake it has built up in the rival Charter Hall Retail REIT.
While analysts are split on the merits of a merger between the pair to create a listed shopping centre fund with a $4.2bn portfolio, some action is widely tipped as a combined vehicle could be more efficiently run.
The two groups also have major investors in common that have been expecting an advance since November, when SCA emerged with its stake in the Charter Hall-managed fund.
In the office sector, Investa Office Fund’s interim report is also taking on greater importance, with the group to report on February 23.
IOF’s independent board committee on Friday said it had offered the suitor for the $2.6bn fund, Cromwell Property Group, some information and concessions to enable it to make a takeover proposal.
JPMorgan analysts said IOF’s board had been “reasonably generous” in providing Cromwell with the information considering no agreement had been reached on price.
Cromwell is yet to comment but is seeking the chance to lift its stake beyond 9.8 per cent, which IOF’s board sees as building a potential blocking stake and not in its interests.
The Investa listed fund has a $3.6bn portfolio, including a slice of Sydney landmark Deutsche Bank Place, where Allens Linklaters recently signed up to a new lease.
JPMorgan analyst Ben Bryashaw suggested a possible explanation for Cromwell not pro-ceeding to limited form due diligence is that it may be waiting for IOF’s half-year result, or it has baulked at making a bid.
He suggested that IOF’s independent board committee was seeking to cleanse itself and move on from Cromwell. He said the next step for IOF was “most likely” entering into the joint venture acquisition of Investa Property Group platform.
At the smaller end, Centuria Capital’s ambitions for the newly acquired 360 Capital’s real estate platform will be in focus. The group is expected to provide an update about its intentions for the renamed Centuria Urban REIT.Centuria Urban’s portfolio comprises three office assets in Brisbane and Melbourne valued at $207.9 million. They are seen as a potential fit with the Centuria Metropolitan REIT, which has a portfolio of 10 office and three industrial entities in several cities worth about $396.7m.

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