Morgan Stanley to buy Australia's Investa

SYDNEY (Reuters) - Morgan Stanley's (MS.N) real estate unit said on Thursday it would buy Australia's Investa Properties Ltd. IPG.AX for A$4.7 billion (US$3.9 billion), the latest in a string of property takeovers by the U.S. investment bank.

Morgan Stanley Real Estate offered A$3.08 for each Investa share. The company, one of the world's largest property investors, with $73 billion under management, said the Investa deal was part of a strategy to increase holdings in Australia.

Investa shares, which have risen 50 percent in the past year on takeover speculation, jumped 15 percent to A$3.10 and triggered sharp gains for other property trusts. The offer would be reduced by an expected 8 cent distribution for the half-year ending June 30, the company said.

Morgan Stanley's offer values Investa at A$6.6 billion when debt is included. It was the bank's second major real estate acquisition in the past nine days and its 15th deal or investment worldwide this year.

Morgan Stanley agreed on May 22 to buy Texas-based Crescent Real Estate Equities Co. CEI.N for US$6.5 billion, including debt, adding 70 office buildings across the United States.

"Investa's portfolio, with its attractive assets in Australia's major cities, is a natural extension of our global real estate investing strategy," Morgan Stanley Australia Chief Executive Steven Harker said in a statement.

Since 1991, Morgan Stanley has acquired assets of US$121.5 billion worldwide, including about US$8 billion this year. Morgan shares rose 9 cents to $85.91 in morning trade.

Investors have poured money into real estate, letting fund managers like Morgan Stanley do more and bigger deals. Last year the company closed three new funds with total commitments of more than US$8 billion -- giving it roughly US$33 billion of buying power when combined with debt financing.

Morgan Stanley, which has been active in Europe for more than a decade, has in recent years been snapping up real estate in emerging markets like Russia, India and Brazil. In Australia, Morgan in 2005 acquired Chifley Tower & Plaza, a 40-story office building in Sydney, and Royal Pines Resort on Queensland's Gold Coast.

Other Wall Street firms also have been aggressive in buying real estate assets in recent years, lured by the high returns relative to other asset classes. Real estate company Tishman Speyer and Lehman Brothers LEH.N on Tuesday said they would buy Archstone-Smith Trust ASN.N, one of the largest REITs in the United States, for US$22.2 billion.

NO DIVESTMENT PLANS

Investa is a diversified property company with A$7 billion in assets under management, including an Australian commercial office portfolio of A$4 billion.

Analysts said the Investa deal would give Morgan Stanley control of commercial properties in Sydney and Melbourne, which have benefited from a surge in rental prices, but it would be eager to sell off its lagging residential division.

Investa Chairman Steve Crane told reporters on a conference call that there were no plans to sell businesses or reduce staff. He declined to say whether Investa had received approaches from other parties, but said the company had been in talks with Morgan Stanley since the end of March.

A successful deal would be the third-largest Australian property trust takeover, trailing Westfield Holdings Ltd. and Macquarie Goodman Management Ltd. MGQ.AX in 2004, according to Dealogic. It would be the largest acquisition of an Australian property trust by an offshore company, and the ninth globally for the year to date.

Rumors of a potential Investa takeover swept through the market last year. Analysts said Australian REITs were ripe for takeovers, particularly from private equity firms.

"It's an English-speaking market, transparent has a good legal framework, and is mature," said John Kriz, managing director, real estate finance at Moody's.

Other Australian property trust shares rose on speculation of more takeovers. Mirvac Group (MGR.AX) jumped 9.5 percent to A$5.75, ING Office Fund (IOF.AX) gained 5 percent to A$1.80, and Australand Property Group (ALZ.AX) added 5.3 percent to A$2.38.