Carmel Hourigan, investment management head at GPT Group. Picture: Dan Himbrechts Source: TheAustralian
AS the battle between GPT Group and Dexus Property Group to become Australia’s largest office property player is fought out in the capital markets, the real estate industry sees little to split them as property operators.
“I don’t think there’s a cigarette paper between them,” one seasoned agent said yesterday.
And that’s a testament to the lift in GPT’s status in the industry, with chief investment officer Carmel Hourigan and funds management head Nicholas Harris driving the business.
Dexus boasts heavyweight operators, including former agency veteran Kevin George, strategist Ross Du Vernet and funds management head Graham Pearson, who have lifted their group’s reputation with a series of big-ticket acquisitions.
The group has aimed to dominate in office markets for some time, while GPT had missed some deals.
Dexus also made the early running by joining with the Canada Pension Plan Investment Board to launch a $2.84 billion bid for the Commonwealth Property Office Fund last month.
GPT struck back this week with a higher, near $3bn bid.
Much of the industry is tipping a carve up as neither party can win full control of a $10bn office property empire. But they are not talking yet.
“We don’t need to do that,” GPT’s Ms Hourigan said.
Despite questions about GPT’s ability to onsell about $1.1bn of the target trust’s best towers into its unlisted GPT Wholesale Office Fund, she says the group is strongly positioned.
Nor is she interested in tapping other parties for equity to back its deal. “We don’t have a requirement for that,” Ms Hourigan said.
There are concerns about GPT’s claim it doesn’t need to undertake due diligence on the near $4bn portfolio it’s looking to buy. Traders at Goldman Sachs noted that Ms Hourigan had been Commonwealth Property Office Fund’s fund manager “a long time ago” but GPT believes it is well qualified.
Dexus has said little about plans for the target trust’s management. GPT sees it as a well-run target trust but it could wring more value out of it as it has different drivers than the current manager, the Commonwealth Bank.
“If we can take that skill base and overlay it on the (Commonwealth) portfolio then I think there’s enormous opportunities,” Ms Hourigan said.
GPT’s sector spread across retail property is also a strength, she argued, pointing to success in Melbourne’s Lonsdale Street and the repositioning of Sydney’s landmark MLC Centre.
She also defends GPT’s move to buy at a time when leasing conditions are tough, noting that values were not yet reflecting a lift in forward indicators.
With the yield spread between premium and A-grade towers still wide, if GPT’s bid gets up it could benefit as the gap narrows, and tenant markets start to perform.
“We’re buying at point where we can see upside in the cycle,” Ms Hourigan said.
Source: The Australian
