Investa's office portfolio posts big gain
Investa Office Fund has flagged a strong uplift in the valuation of its $3.6 billion portfolio after repelling a takeover bid from listed fund manager Cromwell Property Group.
The draft valuations will add $150 million to $160 million, or 8 per cent to 8.6 per cent, over the current book value of the IOF portfolio.
The uplift is driven by the strength of the Sydney office leasing market, capitalisation rate compression and value accretive leasing transactions, the property trust said.
On Friday, IOF closed up 1.3 per cent at $4.56. Its stock price is well ahead of the $4.23 in net tangible asset backing, it stated at its October annual shareholder meeting.
The listed fund’s stock is also trading well above Cromwell’s $2.7 billion offer to privatise the property trust at $4.45 per unit.
IOF has rejected the Cromwell proposal which it said was not compelling or attractive to its unitholders.
Cromwell is persisting with its proposal and is seeking investor support to conduct due diligence and develop a binding cash offer.
External valuations were done on 11 of 22 assets in IOF’s portfolio. It is expected the revaluation will increase the fund’s NTA by between 24c per unit and 26c per unit.
That uplift is in addition to the 2c per unit increase expected from the recent sale of 800 Toorak Road in Melbourne.
Among the highlights of the revaluation, Barrack Place, IOF’s prime office development at 151 Clarence Street in Sydney, is expected to gain 35 per cent over its book value.
“IOF continues to benefit from its high allocation to the Sydney office market and the strong individual performance of its high quality assets,” said fund manager Penny Ransom.
“IOF’s Sydney portfolio is experiencing strong, effective market rental growth driven by improving tenant demand and declining market vacancy in both the A and B grade office markets.
“Capitalisation rates are continuing to tighten in Sydney, Melbourne and Brisbane supported by transactional evidence and we anticipate investment demand for high quality assets to remain strong in these markets.”
