Investa looks closer to home with funds
The sale by Investa Office Fund of its stake in the Dutch Office Fund has been welcomed by the market as it took away uncertainty about the future of the holding and unleashed cash for Investa to reinvest into higher-quality Australian assets.
Under the deal, IOF divested the long-running investment in DOF to a consortium of existing DOF investors for €155 million ($164.3 million).
The deal has been under way for some time as the investment was considered non-core for Investa. It was a minority stake with no management influence.
The deal was done at about a 24 per cent discount to the DOF net asset value.
The analysts at UBS said that while pricing was below their expectations (about 10 per cent), the sale had come earlier than anticipated.
"Ultimately, IOF will be judged on the redeployment of gearing capacity (gearing now 24 per cent v 29 per cent prior) into domestic acquisitions. Acquisitions of $400 million of Australian assets can offset the earnings dilution," the analysts said.
Investa Office Fund is an office sector-specific listed real estate investment trust. IOF has total assets under management of $2.5 billion with investments located in core CBD markets in Australia and select offshore markets in Europe.
JP Morgan's analysts said the stake had been a deterrent for investors during the past five years, but they said the sale was a "major positive for the long-term performance of IOF".
"Proceeds from the transaction were used to pay down all European debt, reducing gearing to 24 per cent, below IOF's 25-35 per cent target gearing range," the analysts said.
"This provides IOF with about $300 million of capacity for domestic CBD acquisitions."