GPT's Australand play ups tempo
GPT Group will need to pay more than $3.1 billion to secure the office and industrial assets of Australand, some of which will have to come from tapping shareholders for cash.
If an offer is made, analysts said the real estate investment trust sector is in for a renewed round of capital raisings early next year. Some REITs are still trading at a discount to their net tangible assets.
Investment managers have said they plan to increase their allocation to the REIT sector next year as returns are tipped to be higher than official interest rates. There is also the weight of money coming from compulsory superannuation, which is now heading back into property because of its safe-haven characteristics.
Aside from a forecast round of mergers and acquisitions, the REIT sector will see a shake-up in strategies as new chief executives take over at Stockland and Mirvac. This will lead to renewed interest in these stocks, which have been quiet amid the management transition.
Both groups can look at becoming engaged in a new round of takeovers in the sector.
Deutsche Bank's Jason Wheate said that, even in the absence of a transaction materialising from GPT, the indicative offer is likely to promote increased interest from potential bidders.
JP Morgan's Rob Stanton said an offer from GPT needs to be more than $3.1 billion to impress Australand's main shareholder, Capitaland. That may include as much as $800 million in an equity issue.
He said the potential acquisition would be a coup for GPT, if it could execute it at a small premium to net tangible assets, driving up to 7 per cent earnings per securities accretion and making strong strategic sense.
He said GPT has solid funding options available.
Other brokers said the move by GPT to go public with its intentions is part of a bigger strategy by the diversified trust.
This may be to mask a full takeover, although it is unlikely GPT wants to buy Australand's residential assets.
"A cleaner outcome for shareholders would be a full cash offer but it is unlikely GPT will 'warehouse' the residential business," Mr Stanton said. "This opens the door for competing or different alternatives, such as a merger of equals with Mirvac, where the valuing of the residential business in isolation would not be required.
"Natural domestic competitors could likely include Mirvac, Lend Lease or DEXUS Property and, from left field, a fund manager/wholesale unlisted combination of Charter Hall or Goodman Group with pension-fund backing."
Another broker speculated that Mirvac may take the remaining residential assets and merge with Australand, while DEXUS may make a counter offer for the office and industrial assets.