Charter Hall fends off competition for Irongate bid by striking deal with Tony Pitt’s 360 Capital

Charter Hall, led by David Harrison, has fended off competition from Growthpoint and Centuria Capital Group to secure a major stake in Irongate Group and launch a buyout proposal for the business. Picture: Hollie Adams/The Australian

Charter Hall has fended off competition from Growthpoint and Centuria Capital Group to clinch a major stake in Irongate Group and launch a buyout proposal for the business.

DataRoom flagged Charter Hall’s move on Irongate on Monday, with the column reporting Charter Hall had made approaches to Tony Pitt’s company about buying its holding in Irongate with a view of launching a buyout proposal for the business.

As reported by the column, it has not been just Charter Hall (which DataRoom can reveal is advised by Barrenjoey Capital Partners) that has been knocking on Mr Pitt’s door about taking on the interest, but Centuria and Growthpoint Properties Australia as well.

Now some are wondering what Mr Pitt will target next, with some sources pointing to the $360m-plus listed Australian Unity Office Fund as next in his line of fire when it comes to taking out strategic stakes in businesses to either launch a takeover or capitalise on a valuation uplift.

Australian Unity Office Fund has been a target before for a takeover by various parties, including Charter Hall and Abacus.

The office fund recently shelved a plan to merge with another entity in the Australian Unity stable due to a lack of shareholder support and the understanding is that Mr Pitt has engaged with parties around the market about a potential tilt at the business.

Mr Pitt, a veteran real estate investor advised by Citi, has made windfalls amassing stakes in real estate groups and selling them at a profit and by selling his 19.9 per cent stake in Irongate at $1.90 per share he will have likely reaped a windfall of at least $33m given his first buyout offer was at $1.65 per share.

360 Capital, with a market value of about $170m, last year embarked on a takeover attempt for E & P Financial Group, formerly Evans Dixon, which manages almost $7bn in funds.

The offer valued the group at close to $160m and came as 360 built a stake of close to 20 per cent in the business.

Most of the shares were purchased from the co-founder Alan Dixon.

However, the board rebuffed the offer and 360 has since let it lapse.

360 Capital REIT also had a stake in residential developer Peet with some aspirations to gain ownership.

Real estate groups have been keen to grow earnings through acquisitions to put funds to work and capitalise on the low interest rate environment.

The offer from the David Harrison-led property fund manager for Irongate emerged on Saturday and it comes after he reached a deal with Mr Pitt’s 360 Capital over his 19.9 per cent stake in the business.

Charter Hall is working with the Dutch Pension fund PGGM on the proposal.

Charter Hall and PGGM’s offer is conditional on six weeks exclusive due diligence and will see 360 Capital acquire certain assets within Irongate’s portfolio, its funds management business and its co-investment stake in the ITAP Fund.

Questions always remained when Mr Pitt’s 360 was bidding for the business how he would fund the proposal, with the Warburg Pincus-backed Asian investor ESR on the sidelines there to buy some of the portfolio as part of Pitt’s original offer.

Charter Hall and PGGM will fund the transaction with cash and debt and it is not conditional on the deal with Mr Pitt or funding.

Irongate is considering the proposal but the expectation is that the deal will be given the board’s backing, given that it is a 23 per cent premium to its net tangible assets.

Charter Hall has been highly acquisitive of late, buying a 50 per cent stake in equities manager Paradice Investment Management, which has $18.2bn of funds under management, last month in what was a departure from the real estate sector.

Its move on Irongate comes after three offers for Irongate by Mr Pitt’s 360 Capital interests, including a bid of $1.72 a share, which came after an offer that was 3.9 per cent lower in November 11 and a bid of $1.65 on October 15.

The Australian industrial and office property landlord Irongate Group was floated in 2019 by Investec when it raised $165m and had a $600m market value.

Irongate owns about 30 industrial and CBD and suburban office properties worth $1.1bn that provide long-term returns.

360 Capital launched its bid in association with 360 Capital REIT, with a $120m market value.

Irongate is advised by Macquarie Capital and JPMorgan.

Irongate’s share price has rallied recently but has come off of late in line with the market’s overall correction.

Charter Hall shares were up 1.8 per cent to $16.75 on the ASX mid-Monday morning.