Starwood Capital in fresh bid for Australian Unity Office Fund

Move values target company at $485m as real estate investment trust takeover frenzy continues.

The offer is not subject to due diligence as Starwood has previously tried to take over the trust.

The takeover frenzy engulfing the real estate investment trust sector is continuing with Starwood Capital launching a fresh bid for the Australian Unity Office Fund, valuing the target company at $485m.

The jump in the sector activity is being driven by the availability of cheap capital and private equity groups chasing local assets that offer attractive returns.

They have been stalking Australian trusts that are undervalued on a global basis. Just last week, Hong Kong-based Gaw Capital Partners emerged as being in talks to take over the listed National Storage REIT.

The move on the Australian Unity-run trust came after a play by property companies Charter Hall and Abacus Property for the AOF fell away last year, as the manager quietly campaigned against their scheme.

The pair controversially dumped their holding in the listed trust but then lost a crucial vote as major holder, Peter Scanlan’s Hume Partners, was against their bid.

Starwood, one of the world’s major real estate players, with more than $US60bn in assets under management, said it would make an all-cash, off-market takeover offer for AOF at $2.98 per unit.

The move comes in the wake of repeated attempts it made in 2018 to take over the fund. But now investors representing 16.7 per cent of AOF units have entered into pre-bid agreements with Starwood.

Starwood has struck the agreements with hedge funds including Maso Capital, Glazer, Blackwell Partners and Athos, giving it the right to acquire their stock.

The price represents a premium of 6.8 per cent to AOF’s net tangible assets at the end of June 2019 of $2.79 per unit and about 4.6 per cent once recent revaluations are taken into account.

Starwood is pitching the cash offer as an opportunity for AOF unitholders to access liquidity at a certain value and at an effective price above the previously recommended Charter Hall/Abacus scheme in late 2019.

Starwood said its offer represented an attractive opportunity for all unitholders to realise liquidity at a certain cash value.

Starwood global head of real estate acquisitions Jeffrey Dishner said the offer provided unitholders with an opportunity to obtain liquidity at a certain price.

“The offer price also represents a premium to the current trading levels and net tangible assets. We look forward to engaging with all stakeholders regarding the offer as we work to successfully complete the transaction,” he said.

The bid is subject to certain conditions, including FIRB approval and a 90 per cent minimum acceptance condition. The offer is not subject to due diligence as Starwood has previously tried to take over the trust.

Starwood said its offer of $2.98 per unit had a higher value than the Charter Hall/Abacus scheme price of $3.04 per unit, after adjusting for distributions of 8c per unit that had been paid since last year’s scheme meeting.

Starwood’s bid is backed by its Starwood Global Opportunity Fund XI, a discretionary fund with total committed capital of about $US7.55bn. Rothschild & Co is acting as financial adviser.

The Charter Hall/Abacus bid stalled as one of the top shareholders, Hume Partners, boosted its stake in the property fund and then voted the deal down.