Dexus in a fix over Investa management takeover

Investa Commercial Property Fund’s play for the management rights of the entire Investa platform could create new complications for Dexus Property Group as it aims to take over the listed ­Investa Office Fund.

The Investa-managed $3.5 billion wholesale office fund, ICPF, last week bid for the Investa Office management platform owned by Morgan Stanley, which would give it the management rights to its own fund and also the listed IOF.

ICPF’s offer for the rights to both itself and IOF initially surprised observers, given that Dexus Property Group was in the process of trying to take the listed trust over.

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If Dexus’s bid, which is supported by the board of IOF, succeeds then the management rights to IOF would essentially no longer exist.

But in a move that could throw a spanner into Dexus’s plans, it is believed that Morgan Stanley, which has a 9% stake in IOF, may be able to vote on Dexus’s takeover offer for IOF if the management rights are offloaded to Investa’s wholesale ICPF.

It is believed the Investa management team hopes Morgan Stanley will vote against Dexus’s proposal if it casts a vote on a planned scheme of arrangement

Morgan Stanley now owns the management platform and the group was initially thought to be precluded from voting on Dexus’s offer for the control of IOF ­because of conflict of interest.

It is understood the ICPF offer would not seek to acquire Morgan Stanley’s IOF shares as part of a deal — as a sale of the management rights had initially been structured — but it may instead open up a chance for Morgan Stanley to vote on Dexus’s ­proposal.

It is believed the Investa management team hopes Morgan Stanley will vote against Dexus’s proposal if it casts a vote on a planned scheme of arrangement.

This would create a block of support to reject the Dexus deal and keep Investa as its manager, while keeping the Investa Office team largely intact and still in control of about $7 billion of assets.

Investa would need the support of other substantial shareholders, with 25% of the register required to vote against the deal in order to block it.

We would need to clarify whether we could vote if the ­management rights changed (hands)

Sharemarket volatility may help the cause of the Investa ­management team, given that Dexus’s offer for IOF is mainly scrip and its share price has fallen by about 8% this year.

Sources close to Morgan Stanley say the group has no position on the Dexus offer and is neutral to how the process plays out. A spokesman for Morgan Stanley could not confirm that it would be able to vote on Dexus’s offer if the management rights were sold.

“We would need to clarify whether we could vote if the ­management rights changed (hands),” the spokesman says.

ICPF’s portfolio of 14 assets includes interests in some of Australia’s leading office buildings. One fund manager says Morgan Stanley may make more money if it sells the entire management platform to ICPF. The fund manager noted that, if Dexus took over IOF, the management rights would be worth substantially less as it would ­control about half of the amount of office towers.

This article originally appeared on www.theaustralian.com.au/property.