A new takeover offer involving two ASX 100 companies and a Canadian pension fund may be another sign of further interest coming back to real estate. Commercial property developer, owner and manager Dexus Property Group (ASX: DXS) has made a $2.3 billion offer for real estate investment trust (REIT) Commonwealth Property Office Fund (ASX: CPA), totalling $1.15 per security in a cash and scrip deal.
It is teaming up with Canada’s Pension Plan Investment Board (CPPIB), which has $196.5 billion equivalent of funds under management, and if successful will control a 26% share of the prime grade office property in Sydney. The consortium would have $11.5 billion of assets under management, making it the largest owner and manager of prime grade Australian office.
Dexus Property Group currently controls a 15% stake in the REIT. Now that CPA is in play, other offers may come because opportunities of this scale and quality are not common, so just as the CPPBI moved to link itself to Dexus once it had a large shareholding, other companies may be considering their options also.
Mirvac (ASX: MGR) and GPT Group (ASX: GPT) are $6.3 billion and $6.2 billion respectively in market capitalisation and larger than CPA ($2.7 billion). GPT Group has $6.4 billion in assets under management, and concentrates on retail and office management and ownership.
Mirvac invests in and manages office and retail, and is also active in residential dwelling development, holding a land bank of 31,130 lots in VIC, NSW and WA.
Lend Lease (ASX: LLC) has a market capitalisation of $6 billion, and in addition to office and retail construction and management, it is involved in residential and infrastructure development domestically and overseas.
Another REIT of $5.7 billion market capitalisation is CFS Retail Property Trust Group (ASX: CFX). Specialising in retail-specific real estate, it has $8.4 billion of assets under management, and its responsible entity is Commonwealth Managed Investments Limited, the same as CPA.
To understand a company better, you have to know its competition so that you are knowledgeable about the strengths, weaknesses and specialisations that set it apart or make it vulnerable. This research also pays off when it comes to sizing up takeover opportunities.
Companies in the same industry are always sizing up each other to see which would make good fits to their growth strategy. They may have plans for mergers or acquisitions, but a sudden takeover offer by another company may set their own plan into motion, resulting in multiple bids and counterbids.
Investors have the possibility of getting a short-term quick gain by buying into a takeover target, but your first responsibility is to follow your investing rules, and only buy quality companies that you would be happy to own even if the takeover failed. In many cases they do, and the sudden jump in share price disappears just as quickly.
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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.