Real Estate Investment Trusts (REITs) Potential Takeover Targets

There may be a new round of merger and acquisition corporate activity surrounding the Real Estate Investment Trusts or REITs sector. There has been a recovery of the commercial property market in Australia that may spur the increased M&A activity. Among the companies which may be taken over include: Mirvac Group (ASX:MGR), Commonwealth Property Office Fund (ASX:CPA), Charter Hall Office Reit (ASX:CQO), Charter Hall Retail REIT (ASX:CQR), Dexus Property Group (DXS) (ASX:DXS), FKP Property Group (ASX:FKP), and GPT Group (ASX:GPT).

Offers and deals for ING Office Fund (ASX:IOF) and Centro Properties Group. (ASX:CNP) have been made with Investa Property working on a purchase of the management rights of ING Office (which is being sold by the Dutch ING Groep), however current Australian ING managers are keen to buy them too, and internalise the fund.

These Real Estate Investment Trusts may be attractive to overseas buyers as funding via debt can be sourced cheaply abroad, as higher costs of debt may hinder domestic investors. There is large discount to NTA (net tangible assets) which is attractive to offshore investors and to the companies themselves. Such a large discount to NTA (net tangible assets) is attractive not just to offshore investors but to the companies themselves.

Other companies which may be troublesome targets for a takeover include: Australand Property Group (ASX:ALZ) and CFS Retail Property Trust (ASX:CFX) as they both have large shareholders, namely, Capitaland for ALZ and for CFX, Commonwealth Bank and Gandel.

However, the takeover target list doesn’t include the larger established REITs (with much larger NTAs) : Goodman Group (ASX:GMG), Stockland (ASX:SGP), and Westfield Group (ASX:WDC).