Blackstone peeved as Canada's Oxford Properties tops bid for Australian office owner Investa
Canadian landlord Oxford Properties Group lobbed a last-minute A$3.3 billion ($2.4 billion) bid for Australian office owner Investa Office Fund on Tuesday, edging out an earlier offer from US private equity firm Blackstone Group.
The bid landed two days before a scheduled shareholder meeting to approve Blackstone's takeover that has Investa's blessings. It caps years of suitors circling Sydney-listed Investa as tight supply and strong growth lift rents in Australia, especially in Sydney where Investa's towers are concentrated.
Oxford's offer, coming in A$90 million (Dh237.4m) over Blackstone's, was also slightly above the book value of the 20-property portfolio, which, besides Sydney, includes towers in Brisbane, Melbourne and Perth.
"What that is telling us is that the bidders see greater value going forward than what they're paying for the stock at the moment," said Winston Sammut, managing director of Folkestone Maxim Asset Management, adding he rued selling out of Investa recently.
"There's still a window of opportunity, if the economy keeps improving and employment continues to be strong, that demand for space will continue to be strong and that because of short supply, rents have to go up," he said.
Oxford, which already owns 10 per cent of Investa, offered A$5.50 per share, a 3.4 per cent premium to the last traded price for Investa shares, compared with Blackstone's offer of A$5.3485.
Directors of Investa's manager, Investa Listed Funds Management, advised shareholders they still recommend the Blackstone proposal.
However, Investa said on Wednesday it was adjourning the planned shareholder meeting for today that was set to vote on Blackstone's offer while it weighs the attractiveness of Oxford's bid.
Blackstone, in a letter to Investa, said the Oxford offer was "not a superior proposal" and that it reserved its rights to terminate its bid and claim a break fee if the meeting were to be adjourned and Oxford's offer deemed better.
"The alternative proposal is subject to completion of full due diligence ... [and] there is a lack of funding certainty for the transaction," said the letter, which was released to media.
A Sydney-based spokeswoman for Oxford Properties Group, the real estate investment arm of Canadian pension fund Omers, was not immediately available for comment.
A spokeswoman for Blackstone, which already sweetened its offer last month, declined to comment. Oxford had no immediate comment.
The bidding war comes as the Australia's commercial property sector defies a softening in home values. With overall unemployment sitting at a six-year low and city downtown capacity barely growing, demand is outstripping supply.
Betting that would lift rents, Investa shareholders rejected an A$2.5 billion takeover from rival Dexus at A$4.11 per share two years ago.
Since then, office space in Sydney in particular has tightened dramatically, with commercial-to-residential conversions and a railway building project cutting space available at the same time as tenants have looked to expand.
British-based consultant Oxford Economics forecasts vacancy rates for Sydney offices to hit an all-time low of 3 per cent by the end of 2019.