Analysts predict rebound in real estate trust M&A activity
The GPT counter offer for Commonwealth Property Office has ignited talk of another round of mergers and acquisitions among real estate investment trusts, according to analysts.
The targets include the Investa Office Fund and Australand, as well as possibly FKP Property. Both Investa and Australand have large shareholders with blocking stakes that could be used as leverage for a takeover.
Australand is significantly owned by CapitaLand, which looked at selling its stake in January this year. But after an exhaustive review, decided to remain on the register. But analysts have said the group could look to sell or even plan an internalisation.
GPT made an unsuccessful tilt at Australand last December, but did not want to buy the residential assets - which is now the best performer for Australand - and consequently dropped the indicative offer. Investa has Morgan Stanley on its register, which could also look to sell or alternatively make its own offer. FKP is less likely now that Stockland has sold out of its 15 per cent interest.
Analysts at Moelis & Co said merger and acquisition activity within the real estate sector has been subdued over the past three to four years but they believe it is likely to rebound. "Management teams of most publicly traded real estate companies spent 2008 to 2010 fighting for survival and 2010 to 2012 stabilising businesses," they said. "As capital markets remain accommodating for M&A activity, many companies are once again in a position to make meaningful acquisitions.
"In addition to public players, some of the largest real estate private equity groups have recently raised large property funds."
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