Australian property trusts in private equity sights

MELBOURNE (Reuters) - A A$4.7 billion ($3.9 billion) bid by Morgan Stanley (MS.N) for Investa Properties Ltd. IPG.AX could herald a wave of private equity raids on Australia's listed property trust sector, analysts said on Friday.

Morgan Stanley Real Estate on Thursday offered A$3.08 a share for Investa, which has a A$4 billion office portfolio, sending the stock 15 percent higher and pushing the listed property trust index .AXPJ up over 4 percent. The index added another 0.2 percent on Friday, in line with the broader market.

The Investa bid was fully priced and a rival offer was unlikely, but further takeover activity in the sector was probable, Macquarie Research said.

"We see more likely targets elsewhere across the sector," Macquarie property analyst Callum Bramah said in a note to clients, with the Investa transaction likely to support higher valuations across the sector.

All Australian listed property trusts were seen in play, with key candidates including Multiplex Group Ltd.'s property portfolio, Mirvac Real Estate Ltd. (MRZ.AX), the Abacus Property Group Ltd. (ABP.AX) and the ING and Macquarie property trusts.

The bid, coming hot on the tail of ProLogis' (PLD.N) A$1.4 billion bid for Macquarie ProLogis Trust MPR.AX and Tishman Speyers and Lehman Brothers LEH.N $13.5 billion offer for U.S. apartment owner Archstone-Smith ASN.MN, highlighted the strong demand for property, analysts said.

Australia's five to six percent yield on property assets was attractive to overseas investors, said ABN AMRO analyst Simon Thackray.

"The concentration and tightness of supply means that you'll probably only have an upward revaluation of property, particularly in a strong economic cycle," he said.

Recent press reports that the U.S. firm, Blackstone Private Equity Group had up to $300 billion in buying capacity in the real estate sector and an appetite for Australian listed property trusts, were also fuelling interest in the sector.

However, one analyst cautioned the interest in the Australian market has pushed up prices to a level where Australian property trusts were being seen as more expensive than their United States peers, which offered better medium-term growth.

"On a yield plus growth basis, or a total return basis, U.S. trusts are actually slightly more attractive than Australian trusts," BT Financial's head of property securities Peter Davidson said.

($1=A$1.21)