Morgan Stanley's Australian real estate unit, Investa Property Group, has abandoned a plan to float some office assets as the offer price did not meet investors' expectations, it said on Wednesday.
Investa was bought by Morgan Stanley Real Estate in 2007 for A$4.7 billion ($4.4 billion), and local media have reported that the company was planning to raise close to A$1 billion in a float.
While the feedback from the market was supportive around the quality of the assets, security of the cash flow, capital structure, the management platform and the potential pipeline, there was a disconnect between the public and private market pricing of the real estate, Investa said on its website.
Merrill Lynch said in a report last Friday that Investa was looking to float at a 7.5 percent premium to net tangible assets (NTA), while office peers Commonwealth Property Office Fund and Dexus Property Group trade at around 20 percent discounts.
It is a real shame they couldn't get it up but the real problem was it's tough for institutional investors to justify paying a slight premium to NTA, said Stephen Hiscock, managing director for SG Hiscock & Company.
Property floats are also vulnerable to signs of softening sentiment in the Asia Pacific region.
Shenzhen-based Excellence Real Estate Group Ltd last month shelved plans for an up to $1 billion Hong Kong IPO month, blaming market conditions.
Australia has seen a cooling in demand for new share offerings with department store chain, Myer Holdings, making poor debut earlier this month. ($1=1.074 Australian Dollar) (Reporting by Eriko Amaha, editing by Jonathan Standing)