Morgan Stanley's Australia Investa unit eyes float

SYDNEY, Oct 27 - Morgan Stanley's Australian real estate unit Investa Property Group is considering listing some property assets to seek liquidity, a top executive said on Tuesday.

Recent media reports have said the company could list as much as A$750 million ($686.8 million) of assets before the end of this year.

"It is one of the options we are looking at," Campbell Hanan, group executive for Investa's commercial office, told Reuters on the sidelines of a property forum.

"Why are we doing it? Because we are always looking for opportunities in capital markets. The environment is conducive to it whether we decide to go down that route or not."

He declined to comment on details, adding that a final decision has not been made yet.

Morgan Stanley Real Estate bought Investa in September 2007 for A$4.7 billion or about A$3.00 per security.

Given the price that Morgan paid and recent sharp falls in property values, some analysts have questioned the timing of any listing. But Hanan said growth in rents has offset any fall in valuations.

"A lot of people look at cap rates (investment returns) and they forget that the rents grew through that period," he said. "Valuations are all about market rents, growth expectations going forward and applying cap rates to that."

Hanan said current office rents are still cheap and have room for double digit growth. In the last property recovery cycle in the 1990s, effective office rents grew 17 percent on a compounded annual base in the Sydney central business district between 1994 and 1998, Hanan said.

In the current cycle, Investa expects vacancy rates in Sydney to peak in 8.7 percent in 2010 and steadily decline to 4.4 percent by 2013. ($1=1.092 Australian Dollar)