Australand keeps takeover talk at bay
In January, CapitaLand, which owns 59 per cent of Australand, revealed it was undertaking an investigation to divest the interest, as part of a general revision of the group's investment strategy.
That was seen as the starter gun for a new round of mergers and acquisitions among the Australian real estate investment trusts, of which none have occurred.
Rumours of potential tie-ups have all been discounted by the REITs, with the managers preferring to focus on their own businesses during a volatile six months.
Many of the REITs' security prices are back to parity or at only marginal discounts to the net tangible asset values, which is considered the benchmark for the sector.
Analysts say chief executives of the REITs would be unpopular to launch aggressive takeovers at a time when the outlook for the office and retail property leasing markets is not as positive as a year ago.
One analyst said the managers needed to restore balance sheets and investor confidence before making moves on others.
GPT Group triggered the speculation when chief executive Michael Cameron revealed he was looking at a potential takeover of Australand.
Some of Australand's key assets include Building F at Rhodes Corporate Park in Sydney, where Citigroup has signed a six-year lease over 3500 sq m. But after months of discussions, which also saw the opening of a data room, no viable buyer came forth, leaving CapitaLand as a long-term shareholder. GPT pulled out of the running in late May.
In a statement released late Monday, CapitaLand and Australand's directors advised that the status quo had been maintained.
"Several indicative proposals were received from various parties for parts and all of the business during the process, which commenced in early 2013. However, no proposal was able to be developed, that was superior to business as usual," the statement says.
"CapitaLand has completed the strategic review of interest in its subsidiary Australand and concluded that Australand will continue as a key investment."
This was announced on the eve of Australand's interim result, which is being released on Wednesday. The diversified group has a December balance date.
According to analysts, the Australand result would be the benchmark for the upcoming reporting season for any impairments in the residential division.
Simon Wheatley, the head of REIT research at Goldam Sachs, said he expected Australand's net profit after tax to be $71.5 million, up from $68.2 million in the previous corresponding period.
Australand has confirmed a 10.5¢ interim dividend. The guidance for the full year is 21.5¢ per security.
Frequently Asked Questions about this Article…
Australand has effectively staved off takeover rumours. Major shareholder CapitaLand completed an extensive strategic review and decided to remain on the register, and no viable buyer emerged after months of discussions and a data room process. GPT Group also pulled out of the running in late May, so the status quo remains.
CapitaLand owns 59% of Australand. After completing a strategic review of its interest, CapitaLand concluded that Australand will continue as a key, long‑term investment and therefore remained on the share register.
GPT Group triggered speculation when CEO Michael Cameron said he was looking at a potential takeover of Australand, but after months of talks GPT pulled out in late May. Analysts say takeover activity was unlikely anyway because REIT managers preferred to focus on their own businesses during a volatile period for office and retail leasing markets.
The process produced several indicative proposals for parts or all of the business and a data room was opened, but according to CapitaLand and Australand's directors none of the proposals could be developed into an offer that was superior to business as usual, so no sale went ahead.
The episode underscores that many REIT managers are cautious about M&A during uncertain market conditions. Security prices across several REITs are back to parity or only marginally discounted to net tangible asset values, and analysts say CEOs are unlikely to launch aggressive takeovers while leasing outlooks for office and retail remain weaker than a year ago.
Australand confirmed a 10.5¢ interim dividend and guided to a full‑year payout of 21.5¢ per security. Simon Wheatley, head of REIT research at Goldam Sachs (as reported), expected Australand's net profit after tax to be $71.5 million, up from $68.2 million in the prior corresponding period.
The article highlights Building F at Rhodes Corporate Park in Sydney as a key asset: Citigroup signed a six‑year lease over about 3,500 sq m of that building. Despite such assets, no viable takeover offer was developed.
Investors should watch Australand's interim result (being released on the Wednesday noted in the article) as analysts view it as a benchmark for potential impairments in the residential division. More broadly, look for commentary on balance‑sheet health, dividend guidance confirmation, and management’s view on leasing markets and future capital allocation.
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