SOURCE: The Australian Financial Review
United States-based real estate investment group HRPT Properties Trust is planning to grow its interests in Australia beyond its initial play for the listed MacarthurCook Industrial Property Fund. The group last week launched a $40.3 million bid for the Australian group, which is run by MacarthurCook, itself now controlled by Sydney-based AIMS Financial Group.
The US group, which is managed by Reit Management & Research LLC (RMR), has about $17 billion assets under management, but is focused on North America.
The move on the Australian fund, with a portfolio of industrial properties worth about $124 million, is one of its first offshore plays, and is rare for a US group.
HRPT managing trustee Adam Portnoy told investors in the US group last week that a lot of companies had raised money in Australia to invest in the US “but I think we’re the first REIT to take public institutional money and invest in institutional real estate in Australia”.
The opportunity for HRPT to make its move came up through its existing ties with MacarthurCook. The Australian group already runs an Asia Pacific property securities mandate for the US group.
This, along with AIMS founder George Wang striking a close relationship with the US group’s founding Portnoy family, led to the takeover offer.
Adam Portnoy has worked in China, lived in Australia and also struck up a close relationship with Wang. “They’re both entrepreneurs,” Greg Bundy, the deputy chairman of the AIMS investment and advisory board, says.
The US group has already flagged its larger ambitions.
“We’re not hoping to make an $US80 million ($88.5 million) investment in Australia just to be an $US80 million investment,” Portnoy says.
He argues that Australian properties and the Australian economy were both well positioned because of the country's natural resources and its proximity to economic growth in the Asia Pacific region. HRPT has been looking beyond Australia for properties, with Portnoy saying “we’ve been looking at generally Asia Pacific and the growth that's occurring over there for some time and trying to figure out a way to tap in to that growth”.
He says the US group has “looked and thought” about investing in China and other parts of Asia but said that it was “very difficult” to invest in those markets with institutional money.
By contrast, Australia offered a mature legal system and trust market, while having an export driven economy.
“Australia, what they do is they export food materials and they export minerals which is all being used to fuel the growth in China, India and other parts of Asia.”
AIMS will work with the US group as it looks to expand Bundy had been planning a move back to the United States ahead of the deal coming up.
He will now stay in Sydney to oversee a joint venture between HRPT and AIMS along with Mark Thorpe-Apps, executive director funds management, and Russell Bullen, who runs MacarthurCook’s real estate unit in Australia.
The deal should also bring to a close the battle for control of the MacarthurCook Industrial Property Fund, which had weighed on AIMS.
The Sydney group had not run a listed real estate fund previously and it faced a spirited challenge from the experienced Real Estate Capital Partners.
ReCap is now backing HRPT takeover bid, subject to a higher bid emerging.
Bundy says the US group is keen to tap Wang’s experience in China. “Even though this deal is relatively small there’s obviously more to come,” Bundy says.
Us Group's deal a launch pad into Asia