The mainland’s biggest buyer of overseas real estate assets may be about to add another $2.4 billion to its global portfolio, as China Investment Corporation (CIC) is said to be considering buying out an Australian property fund.
CIC, which has already purchased more than $7.3 billion in properties across Asia, Europe and Australia over the last five years, is said to be pondering a bid for Australia’s A$3.5 billion ($2.4 billion) Investa Office Fund, according to a report in the Australian Financial Review.
The acquisition would come less than six months after CIC bought up the Investa Property Trust (IPT) portfolio of office assets from the Morgan Stanley subsidiary for $1.79 billion in July last year, and the two sides are said to already be drawing up documents related to this potential new transaction.
Mainland Sovereign Fund Joins Bidding for Office Trust
Investa Office Fund includes investments in 22 properties across Australia and has total assets under management of A$3.1 billion ($2.1 billion) according to its website. Morgan Stanley announced in April that it was exiting from its Investa subsidiary, including the ASX-listed real estate investment trust (REIT).
Reports last month had Australia’s Dexus Property Group agreeing to buy the office fund, however, the trust’s existing stakeholders have said to be looking for competing bidders, as the value of Dexus’ cash and shares bid has slid along with its share price in the interval.
CIC’s interest in the deal was confirmed when the mainland fund reportedly approached local real estate firm MIRVAC, which currently manages the office fund’s assets, to see if the company would continue to manage the portfolio on behalf of the Chinese sovereign fund.
Chinese Investors Receive Extra Motivation From Currency Slide
While Chinese investment in overseas real estate has been growing rapidly over the past five years, the surprising decay in the value of China’s currency may be adding an extra sense of urgency for cross-border investors.
During the last 30 days, the Chinese yuan has lost as much as 2.37 percent of its value versus the US dollar, and investment bank Goldman Sachs is predicting that the yuan could slide another 6 percent over the next 12 months as China’s economy continues to come under pressure.
For CIC, which last year spent $1.44 billion to buy a portfolio of European malls, in addition to its Investa deal, buying now could potentially provide significant savings for the fund charged with investing part of China’s foreign exchange reserves.