Blackstone Group bids $2.3 billion for Sydney-focussed Investa Office Fund

Analysts expect property prices across Australia’s east coast to boom despite a rise in interest rates.

On Monday, Investa Office Fund (IOF), a Sydney focussed company stated, they would unanimously recomend an unsolicited and non-binding offer from U.S. private equity giant Blackstone Group, as it seeks to deepen its exposure to the Australian commercial real estate market, with a bid of $2.3 billion (A$3.08 billion).

Two years ago, IOF’s shareholders had rejected an acquisition bid of A$2.5 billion from DEXUS, an Australian firm.

Blackstone’s move underscores analysts expectations that the entire east coast of Australia is set to see a booming commercial property market even if interest rates rise from their historic lows.

“They have seen an opportunity to get a decent slab of commercial assets, primarily in the Sydney market, which has been the best-performing market for sometime,” said Winston Sammut, managing director of Folkestone Maxim Asset Management, which invests in real estate but does not own shares in IOF. “But they are paying a big price in an environment where interest rates are likely go up.”

Blackstone’s offer represents a 13.2% premium to IOF’s ex-distribution closing price of A$4.55 per share on Friday, equating to A$5.15 per unit.

With the news reaching the market, IOF’s shares surged by more than 10% and by 0430 GMT IOF’s shares were seen trading at A$5.11, their highest level in almost a decade.

Although currently, the retail property market is down, analysts have forecast a strong demand that underpins yields on office space in Sydney, where 21 of Investa’s 36 properties are located.

In recent years, the construction of new office spaces, in Sydney, have come down since developers turned to buil high-rise apartment blocks midst a booming housing market.

As per Oxford Economics, a British-based consultantcy firm, vacancy rates for office properties in Sydney is likely to touch its all-time low of 3% by the end of 2019.


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