Investa Office Fund future remains unclear

The $2.4 billion Investa Office Fund is determined to set its own course as the final elements of Morgan Stanley’s sale of the $9 billion Investa business comes to a head, with listed trust yet to decide whether it would jointly bid for Investa’s management rights with its wholesale cousin.

IOF will hold its annual general meeting in Sydney on Monday where it will update investors on the sales process but it will not be announcing a conclusion to its strategic review.

The board of IOF began the review in August as a format to decide the fate of the fund at a time when it appeared Mirvac would win the management rights to the Investa business.

Since then, Mirvac has been usurped by the Investa Commerical Property Fund, which signed a memorandum of understanding with Morgan Stanley to buy the management platform.

Mirvac is now expected to only manage the $2.45 billion worth of towers Morgan Stanley sold to China Investment Corporation in July.

The reworking of negotiations has added complexity to IOF’s next move and brought the perennial option of a part internalisation back into the mix.

It is understood that IOF has not yet found the proposals or their terms sufficiently compelling to support

But the board is yet to be convinced that is the right avenue and is still keeping its options open, according to sources.

ICPF is believed to have privately courted IOF to join forces in a bid for the management business in a move that would leave the structure of the Investa team with minimal change.

This would give both IOF and ICPF a half stake in the ownership of the management team, which will manage both funds.

But it is understood that IOF has not yet found the proposals or their terms sufficiently compelling to support.

Other options for IOF could be to continue to operate with its management owned by ICPF, or instead seek out another manager or to even pursue a merger.

IOF may decide its interests are best served by staying with the Investa staple

IOF will likely tell investors that it is not yet in a position to commit to supporting ICPF on the purchase of the platform, noting that the management team’s future was ultimately in the hands of Morgan Stanley.

ICPF’s due diligence on the platform ends in mid-December but further details on the agreement with Morgan Stanley may become public before then due to pressure from stakeholders.

If a deal is eventually announced with ICPF as the sole owner of the platform then IOF may decide its interests are best served by staying with the Investa staple.

But the price of the management rights may take into account its possible departure through the implementation of a clawback provision.

Both IOF and ICPF were excluded from the initial sales ­process which kicked off in February but the position of both funds has since improved due in part to the support from investors for keeping the management team together.

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