Australia's Investa eyes relaunching IPO or M&A

SYDNEY (Reuters) - Australia's Investa Property Group, which shelved a planned IPO last year, is still looking at a possible IPO or alternatively could take control of a listed company, its chief executive told Reuters on Wednesday.

Investa is raising capital for its unlisted wholesale fund to buy quality office assets in the Australian market which is set for a significant recovery, Investa CEO Scott MacDonald said.

"We intend to go public when the timing is right," MacDonald said in an interview. "There will come a point in the distant future where some of the investors want to get their money out. And being in the public space, it's easier to do that."

Investa, which is Morgan Stanley's Australian real estate unit and holds A$7.9 billion of assets under management, is also looking at a potential takeover, he said.

"The other alternative, that we will look at and we do periodically, is if there is a public company that is trading at a big discount, and we think it could make sense as a future public platform for us, we will take a look at trying to take control of it through M&A activity," he said.

MacDonald said Investa did not have a timetable for either an IPO or buying a public company.

Investa, which was bought by Morgan Stanley Real Estate in 2007, attempted to list some of its office assets late last year but the plan was shelved as the offer price fell short of investors' expectations.

He said since existing office trusts were still trading at a discount to their net asset values, it was difficult to get full value for assets through an IPO.

"When it is trading at the right place where we can get full value for our assets, we will certainly look to do an IPO," MacDonald said.

GOOD RECOVEY

While the listed property market has been subdued amid the global financial instability, the unlisted sector, in particular the wholesale fund market, has drawn strong interest from institutional investors hoping to buy assets at lower prices.

AMP Capital Investors, a unit of Australia's No.2 wealth manager AMP (AMP.AX), is raising money for its open-ended property and Asian equity funds.Investa's whole sale fund, Investa Commercial Property Fund (ICPF), is currently seeking to raise between A$300 million to A$400 million, MacDonald said.

"We hope to have indications of interest by mid August," he said, adding preliminary feedback had been strong.

Investa Group Executive Campbell Hanan said that cap rates, or returns on investment properties, on good commercial office assets were 90 to 100 basis points above the historical average, indicating yields will likely compress and asset values rise.

Hanan said Australian office vacancies had started to peak, setting the stage for rental growth, while supply remained limited as current low rents did not justify new construction.

"All these ingredients are pointing to a good recovery," he said, adding that investors could get an internal rate of return (IRR) of 10 to 13 percent.

Hanan forecast high single-digit growth in effective rental growth over the next four years for Sydney's central business district and mid-to-high single-digit growth for Melbourne.

(Editing by Ed Davies)