Tishman Leads Way For Offshore Trusts

Sydney Morning Herald

Wednesday December 1, 2004

Carolyn Cummins Commercial Property Editor.

The listing today of the $525 million Tishman Speyer Office Fund is expected to open the floodgates for more foreign investment funds to raise funds in Australia.

Tishman Speyer Office issued its units at $2, offering Australian investors a portfolio of 12 US office buildings including 300 Park Avenue, New York, the AT&T Corporate Centre, Chicago and One Bush Plaza, San Francisco.

It will be run jointly in Sydney by Daniel Rubenstein and a representative of US owner-developer Tishman Speyer Properties, Tom Feldstein.

The listing comes at a time when the local listed property trust sector is riding high on a big inflow of funds and record prices due mainly to the current spate of mergers and acquisitions.

The fate of General Property Trust still hangs in the balance with Stockland's managing director Matthew Quinn doing the rounds of fund managers to discuss his firm's scrip offer for GPT.

But any successful outcome for Stockland will be influenced by Westfield, which holds about 6.53 per cent of GPT and is expected to use that stake to wrestle some GPT assets away from any new owner.

Merrill Lynch told clients that the alternatives facing GPT include a joint bid from Lend Lease or others that have an interest in some of the GPT.

"Lend Lease will not undertake a scheme of arrangement but has not ruled out a more conventional [offer] structure," the Merrill Lynch report says.

"We would imagine that Lend Lease could propose changes now but only implement them if the Stockland offer lapsed.

"Investors [in GPT] may not want to give away control. Now that they have voted no [to the merger with Lend Lease] and given up a bid worth $3.82 a unit, will they hand over control for a moderate premium. And the Westfield alternative - whatever that may be."

The broker said one alternative could be Westfield teaming with its new friend Multiplex to make a joint bid for GPT and split the assets.

"This group will need to be an aggressive buyer of property if it is going to deliver on its development aspirations and remain in the LPT sector."

Merrill Lynch wrote that its "as is" fair value on GPT is $3.30 a unit, less than 6 per cent below the value of the current Stockland offer.

One of the reasons for the current takeover mania is to bolster assets under management. Office towers are difficult to build so trusts are forced to cannibalise each other for properties.

In its report Sydney Metropolitan Office, Colliers International's NSW research manager Felice Spark says a lack of good quality stock coming to market for sale has limited investment sales in 2004 in most suburban office markets, in particular Chatswood, Macquarie Park, Parramatta, Homebush Bay, Rhodes and South Sydney.

"North Sydney and St Leonards have witnessed the most activity in 2004.

"Competition for good quality investment stock is high from both the institutional and private investor markets with commercial office property continuing to be viewed as a desirable asset class," Ms Spark said.

"When properties have come to market for sale they have been achieving strong yields in the region of 7.5 to 8.5 per cent for quality A-grade accommodation in most markets. The continuing low interest rate environment has also fuelled a growing trend for strata conversion with many users now opting to become owner occupiers and purchase rather than lease."

© 2004 Sydney Morning Herald

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