A $6 billion surge in corporate action has hit the listed property sector in the strongest signal yet, for some at least, that a correction is just around the corner.
The transactions and mooted deals cover the gamut of real estate, from affordable housing and data centres to prime Sydney towers and logistics facilities.
Only retail portfolios, significantly, have been left out of the bubble of M&A activity as global players steer away from that sector.
While each deal is different, the sheer volume of action now on foot is prompting analysts and investors to take a broader view.
“A lot of times, elevated levels of M&A are more indicative of being later cycle,” said Tim Slattery, managing director at Melbourne-based fund manager APN Property Group.
“Often you’re closer to a correction in asset values when you see more M&A. The question is whether the M&A continues or whether we are getting closer to the top and there’s more risk on the downside.”
This week alone has seen the board of Propertylink, which has a portfolio of predominantly industrial assets, show its support for a $723 million takeover bid by private equity-backed, Asia-based logistics platform ESR.
In a smaller deal, shareholders at fund manager Folkestone on Wednesday approved the acquisition of their business by Charter Hall in a $205 million deal.
By Thursday, the long-running $3.4 billion tussle for control of Investa Office Fund and its portfolio of trophy office towers, such as Sydney’s Deutsche Bank Place, should be resolved with a deadline for US private equity giant Blackstone to match the bid of its rival, Canada’s Oxford Properties Group, or get out of the race.
And that’s not all. Already this month data centre operator NextDC has moved to buy out a property trust that owns three facilities it runs in a $232 million deal.
US giant Hometown is now compulsorily acquiring the remaining register of budget accommodation provider Gateway Lifestyle as it completes a $685 million takeover.
Another US player joined the M&A fray this month, with Starwood Capital to do due diligence on Australian Unity Office Fund after winning favour for its $480 million buyout bid.
JPMorgan banker Simon Ranson has been in the thick of the action, through his involvement in the Investa and Propertylink deals, among others.
He is taking an optimistic view, acknowledging that while the low Australian dollar can make platforms here easier pickings for offshore raiders, in fact it’s the longer term strength of the local economy and its property yields relative to other Asian regions that are the real appeal.
“I don’t think it’s necessarily late stage. People have been saying it’s late stage for the last four years and they’ve been wrong,” he said.
“There are limited opportunities in direct property. You can go and buy an individual asset but it is very hard to put $1 billion or $4 billion to work. That’s why people are prepared to do corporate deals.”
Watching on with interest has been CLSA analyst Sholto Maconochie, who particularly notes ESR’s looming takeover of Propertylink.
For him, that deal speaks to a broader theme: global institutions want to redress their underweight exposures to industrial assets as retail investment become less appealing.
“People want platforms and they want access to assets and a manager. If you want to get access, and it’s very hard to get capability, you’ve just got to buy it,” he said.