Singapore puts price on Australand
IT MAY have been a sparse few years for deal-makers in investment banking but the new year has got off to a quick start now the Singaporean government has formally put its controlling stake in Australand on the block.
Almost a month ago GPT went public with a bid to buy key assets out of Australand after earlier private approaches failed. GPT wanted to buy Australand's property portfolio along with its commercial and industrial assets, which between them account for about 80 per cent of Australand's assets.
Of no interest was the residential development arm, given the pressure on both the Queensland and Victorian markets and GPT's lack of exposure to this part of the market. Subsequent speculation Australand might prefer to deal with Mirvac proved wide of the mark as it bides its time.
Australand has appointed Macquarie Capital, Fort Street Advisers and King & Wood Mallesons to advise it as it prepares for a change in control. The choice of Fort Street Advisers is of interest, given its role in the recapitalisation of the Goodman Group and the sale of Valad, among other deals in the property sector.
For Australand's Singaporean parent, CapitaLand, the decision to review its investment in Australia is part of a broader reorganisation.
In its New Year message, CapitaLand highlighted growth opportunities in China, where it has a suite of projects under way.
It has also reorganised its structure, which has served to highlight its growth options in China and Singapore. Any decision to sell out of Australia should be seen in the context of redeploying capital to higher-growth markets, rather than a more fundamental view on the outlook for Australia's property markets.
It also points to a more sober view on the outlook for Australia's currency. Clearly, while the dollar is overvalued few expect a quick pull-back. That will occur in due course, so preparing to move on now makes sense. Equally, CapitaLand is not alone among foreign investors moving to reallocate investment funds from Australia.
With a market capitalisation for Australand of $2 billion, this values the Singaporean stake at about $1.3 billion, without incorporating a premium for control.
Thursday's closing share price of $3.49 is little changed from its most recently stated net asset backing of $3.46.
Given the small size of the Australian market, and the inability to integrate investments here into other parts of its operations, it makes sense for the Singaporeans to quit Australand if the price is right. And Australia is not the only part of the group's assets that may be sold, with the rule also being run over CapitaLand's assets in the UK, Vietnam, India and Japan.
But climbing further aboard the Chinese tiger will bring a new set of risks for CapitaLand shareholders, which will be exacerbated by selling down an investment exposure to a number of property markets regionally.
As it recently told analysts, it intends to sharpen its focus on its core strengths in the key China and Singapore markets, confident of the continued transformation in the Chinese economy.
Similarly, it is in no rush to sell out of Australia, which comes as no surprise given the paucity of competing bidders for the assets, which may limit any bidding tension in a change of control.