Investa fund flags the best offices will remain on top
Property group Investa’s flagship commercial property fund needs little introduction.
The vehicle, now a near $7bn behemoth, played a key role in determining the office group’s future in the past decade, when it came under siege from corporate bidders.
In a complex series of plays, the Investa Commercial Property Fund took control of the overall management platform, which has now grown to about $12bn, and, eventually, saw Canada’s Oxford Properties come in alongside it.
Those nail biting times have passed, but the fund, now 20 years old, is still focused on making its mark on city skylines, with a mix of new projects and classic skyscrapers.
The vehicle, now run by Brendan Looby, has a storied history, and grew quickly from a relatively modest start to own towers around the country. Its holdings include gems such as its stakes in Sydney’s Deutsche Bank Place and Melbourne’s 120 Collins St.
More recently, it has been in the buyer’s ring in Canberra, picking up a government-anchored complex on a tight yield, and a year earlier it took a half stake in the under-construction 39 Martin Place in Sydney’s heart.
Investa sees its 16-strong collection of office assets as a testament to how the top echelon of city towers will prevail against some of the tides smashing into offices.
Investors have been rattled by the shift to work from home, and the recent tech crash in the US has prompted caution on how global players see the asset class.
However, Investa believes its top class portfolio will see it through the storm and leave it well positioned at a time when some listed peers are all but stranded.
Investa chief executive Peter Menegazzo, who also had a stint running the fund, recalls the heady corporate contest for the entire management business – which drew in Mirvac, LaSalle Investment Management, Dexus and Cromwell.
But a crucial move in which investors backed the fund board’s move to acquire Investa’s operating platform guaranteed its independence and set it up to grow. It later took what became a crucial 19.9 per cent stake in the listed Investa Office Fund. There was a three-year battle for IOF – drawing four takeover attempts from Dexus, Cromwell, Blackstone and Oxford, before the latter won out.
Mr Looby says the fund kept up its active strategy throughout, with its core focus augmented by an element of development. “That active strategy really provided the alpha for the fund,” he said. And it is still working with costs in check as major towers are delivered in Sydney and Brisbane, with no “red flags” on this front. Instead, the focus is on the longer term.
“We want to remain the top tier premier fund from a performance and asset base viewpoint. And we’ve really positioned that asset base to be, one, attractive to tenants, and, two, be attractive to equity investors. And ultimately, those two things go hand-in-hand,” he said.
The environment is shifting as lower quality assets fall from favour. “The discussion is all around the demand remaining for the very best office,” Mr Looby said. “And you’ve got the biggest global investors … still saying that they’re happy to still play in office, but it can’t just be a generic, middle of the pack office building; it’s got to be the top of the top.”
Mr Looby said Australia still screens well for global investors, and they know just how tightly the best parcels are held in Australian cities. “Sydney and Melbourne are still two of the most favoured office markets, from what we’re hearing,” he said.
He acknowledged that more caution has come in the global landscape, but says the impact is different for unlisted players. “Private markets are better able to play through market cycles.”