* Canadian bid is A$90 mln above Blackstone (NYSE:BX) offer
* Tight supply seen driving office rents higher
* Market has defied property downturn
* Bid announced after market, Investa shares not traded (Adds Blackstone response, analyst quote and background on Australia's property market)
By Tom Westbrook
SYDNEY, Sept 4 (Reuters) - Canadian landlord Oxford Properties Group lobbed a last-minute A$3.3 billion ($2.4 billion) bid for Australian office owner Investa Office Fund IOF.AX on Tuesday, edging out an earlier offer from U.S. private equity firm Blackstone Group BX.N .
The bid lands two days before a scheduled shareholder meeting to approve Blackstone's takeover that has Investa's blessings. It caps years of suitors circling Investa as tight supply and strong growth lift rents in Australia, especially in Sydney where Investa's towers are concentrated.
Oxford's offer, coming in A$90 million over Blackstone's, is also slightly above the book value of the 20-property portfolio, which, besides Sydney, includes towers in Brisbane, Melbourne and Perth.
"What that is telling us is that the bidders see greater value going forward than what they're paying for the stock at the moment," said Winston Sammut, managing director of Folkestone Maxim Asset Management, adding he rued selling out of Investa recently.
"There's still a window of opportunity, if the economy keeps improving and employment continues to be strong, that demand for space will continue to be strong and that because of short supply, rents have to go up," he told Reuters by phone.
Oxford, which already owns 10 percent of Investa, offered A$5.50 per share, a 3.4 percent premium to the last traded price for Investa shares, compared with Blackstone's offer of A$5.3485.
Directors of Investa's manager, Investa Listed Funds Management Limited, advised shareholders to take no action and said they still recommend the Blackstone proposal while they consider the new offer. An Investa spokesman said it was not yet decided if Thursday's scheduled shareholder meeting would proceed.
A spokeswoman for Blackstone, which already sweetened its offer last month, declined to comment. Oxford had no immediate comment.
The bidding war comes as the Australia's commercial property sector defies a softening in home values. With overall unemployment sitting at a six-year low and city downtown capacity barely growing, demand is outstripping supply. that would lift rents, Investa shareholders rejected an A$2.5 billion takeover from rival Dexus DXS.AX at A$4.11 per share two years ago.
Since then, office space in Sydney in particular has tightened dramatically, with commercial-to-residential conversions and a railway building project cutting space available at the same time as tenants have looked to expand.
British-based consultant Oxford Economics forecasts vacancy rates for Sydney offices to hit an all-time low of 3 percent by the end of 2019.
Oxford Property Group's bid was announced after market hours in Sydney, where Investa is listed. Investa shares last traded at A$5.32, around 15 percent higher than before Blackstone's initial offer landed. ($1 = 1.3868 Australian dollars)