Mergers and acquisition activity in real estate has thrown the spotlight on property investment managers, with some suggesting their perceived level of expertise could sway an outcome as to whether deals are completed.
AMP announced on Friday that it had agreed to sell a 60 per cent stake in the majority of its AMP Capital division to Ares Management in a deal that values the unit at $2.25bn.
The transaction excludes AMP Capital’s equities business.
AMP Capital’s private business on offer has $26.6bn of real estate under management, $19.5bn in infrastructure assets and $6.8bn in infrastructure debt.
The talk in the market is that Ares is not well known among major institutional real estate investors in Australia and those that have their holdings currently managed by AMP may need a lot of convincing by the US group to allow it to take the reins.
Of the US$149bn ($193bn) of global assets that Ares managed at March last year, 76 per cent are in the credit business, 12 per cent private equity and real estate accounts for 9 per cent.
Dexus Property Group is already expected to take over as the manager of the $4bn-plus AMP Capital Diversified Property Fund, with the fund’s investors said to be largely in support of the move after some disappointment under AMP.
Some are predicting that a similar situation could unfold with other funds, including the AMP Capital Wholesale Office Fund, where experienced real estate managers lobby investors to take over their management.
The logical contender to fight for the management rights of that fund is Charter Hall, which counts AMP’s former real estate head Carmel Hourigan as its head of office.
“There is a lot of water to flow under the bridge,” said one real estate insider about the AMP-Ares transaction, which remains non-binding.
Also playing out in the space is a move by Canada’s NorthWest Healthcare Properties to wrestle Australian Unity’s most prized investment fund – its healthcare real estate portfolio – out of its hands.
In a typically aggressive play by the Canadian group, Northwest already has a put option over a 16.2 per cent stake with investor Hume Partners, the investment vehicle of the Scanlan family, and has made a proposal to buy the fund.
Australian Unity on Friday said on Friday that it had rejected a takeover for the $2.5bn portfolio from Northwest saying it undervalued the portfolio.
Market experts say that the move was predicable by Australian Unity, given that the offer was about a 10 per cent premium to the value of the portfolio’s assets, whereas the Northwest-managed Vital Healthcare Property Trust trades at a premium of about 30 per cent.
But at the same time, Australian Unity also manages a listed office fund and other healthcare assets, and some have questioned whether other real estate groups try to sway Australian Unity investors to change to a manager that lifts performance.
The Australian Unity Office Fund has seen its shares slide since it rejected a $3.04 per share bid from Charter Hall and Abacus Property Group in 2019.
Meanwhile, Costa Group could have helped call the shots in the takeover battle for its landlord, Vitalharvest Freehold Trust, but it has sold down its stake of about 5 per cent to hedge funds and others.
A $1 per share offer from Macquarie Infrastructure and Real Assets plus a 2.5c per share interim dividend was trumped on Friday by a higher offer from Roc Partners, which is bidding $1.08.
The manager Primewest has already embarked on an option to sell its 19 per cent stake in Vitalharvest while Macquarie is also a substantial shareholder in its own right.
Some shareholders are already planning to vote down the MIRA deal based on it being too low, including Investors Mutual with about 4 per cent.
But MIRA is arguing that the Roc offer has funding uncertainty and may not eventuate, based on its fund raising track record.
Costa has a strong relationship with MIRA, which is a landlord for its other farms.
A major point of contention among investors has been whether the rents on the horticultural trust are fixed or variable at a time the sector prospers.
Elsewhere, on the sales competition for the $3.5bn-plus Milestone Logistics Group, it is understood that the Link REIT, based in Hong Kong, is among the parties that had put forward a bid for the portfolio. Singapore’s GLP is now known not to have submitted a first round offer.
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