Morgan Stanley Agrees to Buy
Investa Property for $3.9 Billion

Morgan Stanley agreed to pay US$3.9 billion for Investa Property Group of Australia, continuing its global real-estate buying spree with the biggest overseas acquisition of an Australian property company ever.

Morgan Stanley Real Estate Thursday offered A$3.08 (US$2.54) for each Investa share, a 14% premium to Wednesday's closing stock price, in a deal endorsed by the Australian company's board. The offer values Investa at A$6.6 billion (US$5.45 billion) including debt.

With US$55.6 billion of assets under management, Morgan Stanley's real-estate arm has been snapping up property around the globe. In Japan, it agreed to buy 13 high-end hotels from All Nippon Airways for US$2.4 billion in April, in a deal that will make it one of Japan's biggest hotel operators. It also acquired a 3% stake in Japan's biggest developer, Mitsubishi Estate Co., on the public market. The current value of the stake is about US$1.4 billion.

Founded in 1991, Morgan Stanley's real estate division is becoming more aggressive as part of the bank's push to move into businesses with higher returns. The real estate division operates in several areas, such as investment-banking advisory and underwriting services, investing its own capital in real estate, and the handling of commercial mortgage-backed securities.

Until this deal, Japan had been the focal point for most of the division's substantial deals in Asia, thanks to the size of the economy and the maturity of the market. Outside of Japan, where asset values are much lower and regulations sometimes more cumbersome, getting sizable deals done hasn't been easy.

In India, Morgan Stanley has announced three deals with a combined value of some $300 million over the past 18 months. The firm has a strong push on in China, where it has 60 people working in Shanghai to source property deals. It is investing in long-term developments that may take up to four years to complete, buying stakes in property companies ahead of initial public offerings, and renovating incomplete or rundown buildings.

In the U.S., the firm last month agreed to buy Crescent Real Estate Equities Co. of Fort Worth, Texas, for about $6.5 billion including debt.

"Our global real estate business has been focused on investing in gateway cities all over the world,'' Steven Harker, chief executive officer of Morgan Stanley Australia, said in a statement. "Investa's portfolio, with its attractive assets in Australia's major cities, is a natural extension of our global real estate investing strategy.''

Investa is a diversified property company with A$7 billion in assets under management. Among its prime properties is a Norman Foster-designed building in Sydney where Qantas Airways Ltd. and Deutsche Bank AG have their main Australian offices.

Like Japan, Australia offers a more mature economy where sizeable transactions are more abundant and less contentious than elsewhere in the region. This is the second deal Morgan Stanley has done in Australia this year. In January, with a partner, it acquired another Australian company, Grand Hotel Group, for about A$540 million and took it private.

The bid for Investa is subject to an independent expert's report confirming the offer is in the best interests of shareholders. The offer requires 75% of the stock voted at a shareholder meeting expected to be held in August.

Investa is being advised by UBS AG, while Citigroup Inc. and Morgan Stanley advised Morgan Stanley Real Estate.

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