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Macquarie’s Charter Hall REIT Bid Inadequate, Directors Say

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Charter Hall Office REIT has turned down a sweetened bid by a Macquarie Capital-led group of institutional investors to gain control of the property trust, its independent directors said.

The A$2.43-a-unit offer to buy the shares not owned by the trust’s manager, Charter Hall Group, is 4 cents more than the initial bid for its Australian business, the directors said in a statement to the Australian stock exchange today. The proposal “is still not adequate,” and the group will conduct further due diligence on a non-exclusive basis to improve its proposal, according to the statement.

Macquarie is unlikely to raise the bid “by a hell of a lot more,” Winston Sammut, managing director at Maxim Asset Management Ltd., said in a telephone interview. “But given the environment we’re in, it may be enough to sweeten the deal.”

The bidders in August offered A$2.39 per unit for Charter Hall Office, with the value rising to A$3.52 when the expected return on the sale of the trust’s U.S. assets was added. The company is in the process of selling the properties to entities affiliated with Beacon Capital Partners for $1.71 billion.

While the earlier bid was conditional on the completion of the U.S. asset sale, the new proposal, at a 7.6 percent discount to net tangible assets, offers the option of the Macquarie-led transaction being completed first, it said. The current bid values Charter Hall Office’s Australian business at A$1.2 billion ($1.15 billion), according to the company.

Macquarie Group, Australia’s biggest investment bank, stepped away from its listed property funds model in February 2010, selling stakes in its real estate funds and the rights to manage them to Charter Hall Group. The Macquarie-led group’s offer for Charter Hall Office, the former Macquarie Office Trust, would give it control of 86.6 percent of the trust, with Charter Hall Group owning the remaining 13.4 percent of the office REIT, according to data compiled by Bloomberg.

Charter Hall Office shares climbed 0.9 percent to A$3.30 as of the 4:10 p.m. close of trading in Sydney. Charter Hall Group shares advanced 3.4 percent to A$1.685.

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