Uplift in portfolio valuations: Investa Office Fund (ASX: IOF), has come out with flying colors with the update on independent valuations of IOF’s 20 properties as at 31 May 2018. Investa Listed Funds Management Limited (ILFML), which is the responsible entity of IOF has revealed that the Independent Directors of ILFML commissioned the independent valuations in response to the proposal from funds managed or advised by Blackstone Singapore Pte. Ltd. or its affiliates to acquire all of the units in IOF by way of trust scheme.

Under this valuation, there has been an increase of $316.1 million or 7.9% over 31 May 2018 book value, supported by the strength of the Sydney and North Sydney leasing and transaction markets. IOF has a significant exposure of 65% to said regions and leasing activity within the portfolio has been strong with progression of the Barrack Place development at 151 Clarence Street, Sydney. The uplift included 72% rise owing to positive leasing outcomes and market fundamentals with remaining advancement from total uplift at the back of capitalisation rate compression.

Particularly, Sydney CBD portfolio was identified to have $ 11.6% uplift, North Sydney portfolio witnessing 7.4% uplift, Melbourne portfolio with 4.9% uplift and 836 Wellington Street, Perth witnessing 17.3% uplift. As at December 31, 2017, IOF’s net tangible assets (NTA) was $4.95 per unit, which will now rise by 53 cents per unit, to come up to a pro-forma NTA of $5.481 per unit. Thus, IOF has benefited from rental growth and solid investment demand in key regions.

Meanwhile, IOF had received the unsolicited, indicative and non-binding proposal from funds managed or advised by Blackstone Singapore Pte. Ltd. or its affiliates to acquire all of the units in IOF by way of trust scheme, and the group also entered in to the scheme of arrangement with Blackstone. Under this, an offer price of approximately $5.15 per unit has been made after taking IOF’s expected 2H18 distribution into account. As of now, IOF unitholders will be meeting in August to consider the Scheme. IOF stock post the valuation uplift, has risen by 1.92% on June 26, 2018, and is above the offer price. The stock has been up about 22% in last three months, as at June 25, 2018. We give a “Hold” recommendation at the current price of $5.32 while there may be a possibility that a superior offer might come into picture.

 
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