Starwood Takes On £674M Listed Company At 9% Discount As UK M&A Spree Continues

U.S. private equity investor Starwood Capital has agreed a deal to buy a listed UK property company at a discount to its net asset value. 

The board of the Balanced Commercial Property Trust recommended an offer from Starwood to buy the company for £674M. That is 25% above the company’s average share price for the three months before it put itself up for sale, but a 9% discount to its net asset value. 

BCPT launched a strategic review in April after the company’s shares traded at an average discount to its net asset value of 36% for the past year. It weighed whether to sell off assets piecemeal, ultimately deciding to sell the entire company to Starwood. 

The agreement is part of a spate of M&A deals in the UK-listed real estate sector.

On the same day, Segro announced that it had agreed to buy industrial peer Tritax Eurobox for £552M, a 14% discount to that company’s net asset value. In March this year, LondonMetric bought LXi for £1.9B in a deal that created the UK’s third-largest listed property company. 

Starwood, run by chairman Barry Sternlicht, flagged BCPT’s industrial assets as being of particular interest in a statement accompanying the deal announcement. Of the company’s £1B in gross assets, 35% are in logistics. 

BCPT’s largest single asset is the St. Christopher’s Place mixed-use estate just off Oxford Street, which is valued at more than £200M, it said in a second-quarter factsheet. 

In the small print accompanying the announcement, Starwood said its strategy would be to take the next few months to analyse the portfolio and decide which assets are noncore and should be sold off straight away, and which it would invest in. As an opportunity fund manager, the likelihood is that the company will be broken up and the assets sold over the next few years. 

BCPT is externally managed by Columbia Threadneedle. Starwood said the company’s contract will be terminated, and it will take over the management.