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IPD in MSCI buyout talks, faces rival UK property index

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GLOBAL - Equities index provider MSCI is in exclusive talks to acquire IPD after prospective owners, believed to include Bloomberg, Reed Elsevier and S&P parent McGraw Hill, pulled out.

Neither party to the “exclusive advanced discussions” was commenting on them this week (nor was Lazard, which arranged them), except to say there was no assurance that any agreement would be reached.

One firm believed to have considered an acquisition early on dropped out after examining the company.

It is yet unclear how MSCI might absorb IPD’s complex shareholder structure. IPD employees and directors owned just over 50% of ordinary shares, as at May 2012, with the remaining interests owned by real estate investors, fund managers and property advisers.

Invista Real Estate Investment Management sold a 5% shareholding at the end of 2011 to 45 individuals (mainly directors and employees of IPD), rather than to another institution.

Real estate - and valuation-based indices - will mark a departure for MSCI, which has up to now focused on equities and most recently an economic exposure index launched this month.

The proposed deal comes a few months after IPD announced it would launch a US index in conjunction with the Pension Real Estate Association (PREA), and the revelation that regional real estate associations ANREV, INREV and NCREIF would launch a global real estate index.

IPD’s collaboration with PREA in the US and its recent work in developing a pan-Asian index is likely to have had a bearing on the attractiveness of the company to any potential buyers.

The company focuses on developing valuation indices, based on independent appraisals, rather than transaction indices, although it has been developing hybrid transactation-linked indices that seek to provide a better measure of market volatility.

IP Real Estate is aware of plans by another company to launch the UK’s first transaction-based commercial property index, potentially setting itself up as a major rival.

The new entrant told IP Real Estate there would be sufficient room in the industry for both transaction and valuation-indices.

A director of the company said: “Where you need valuation indices is where there aren’t transactions happening or where you can’t get the information underlying them. So there is a place for both.”

However, a well-placed industry source described a transaction index as presenting “much better evidence than someone’s opinion of how much an asset is worth”.

He added: “A price may be overly positive or negative, but you can’t argue with it.”

He described the introduction of an index that “really looks like the market” as “one of the most structurally exciting developments we’ve seen in a long time”.

Fernandez said this week that MSCI aimed to be “a diversified provider of investment decision tools” covering, among others, fixed income and hedge funds.

As the two parties confirmed negotiations, Fernandez addressed a hastily convened investor webcast after fund manager Vanguard said it would cease to use MSCI indices as the basis for its exchange-traded funds - a hit to MSCI’s revenues of $24m (€18.5m).

Fernandez said the loss proved the wisdom of the firm’s diversification strategy.

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