Palace Capital engages with activist as industry M&A rumours swirl
Palace Capital has had its first contact with a new activist investor, as talk of takeovers among London-listed real estate companies grows.
With stock prices falling during the Covid-19 pandemic and discounts to NAV growing, several public property companies have found themselves welcoming new shareholders onto the register in recent weeks and months.
Palace Capital chief executive Neil Sinclair told EG that he held his first virtual meeting this week with Peter Gyllenhammar, whose eponymous Stockholm-based investment firm has built a 4% stake in Palace.
Palace Capital has had its first contact with a new activist investor, as talk of takeovers among London-listed real estate companies grows.
With stock prices falling during the Covid-19 pandemic and discounts to NAV growing, several public property companies have found themselves welcoming new shareholders onto the register in recent weeks and months.
Palace Capital chief executive Neil Sinclair told EG that he held his first virtual meeting this week with Peter Gyllenhammar, whose eponymous Stockholm-based investment firm has built a 4% stake in Palace.
Sinclair said Gyllenhammar is supportive of the REIT’s strategy but is keen to see action taken over its discount to NAV, which is currently around 50%.
Peter Gyllenhammar’s website says that the firm’s approach to publicly traded investments usually sees it “aim to establish a position as the largest shareholder” adding: “Our investment profile is typically that of a ‘proactive investor’.”
Sinclair said he did not ask Gyllenhammar whether the firm hoped to increase its stake. “He’s got 4% – would he want more than that? Probably,” Sinclair said. “Is he the sort of guy who would be happy at 4%? Probably not, but we don’t know… But he’s supportive.”
Gyllenhammar had not responded to a request for comment by the time of publication.
Peter Gyllenhammar’s increased stake in Palace comes hot on the heels of private equity firm KKR taking a 5.35% stake in Great Portland Estates, as well as African investor Lighthouse Capital building a stake of almost a fifth in Hammerson.
Kieran Lee, an equity analyst at Berenberg who has flagged Helical and GPE as likely bid targets, said companies focused on the London office sector may prove particularly appealing. “There is a huge divergence between direct and listed markets – that is obviously an opportunity,” he said. “The sector is very attractive… I can see why there is renewed M&A attraction. You’ve got $2tn of potential firepower sitting in private equity and that needs to be deployed.”
Matthew Saperia, a real estate analyst at Peel Hunt, said: “It is a question of when, and not if, further M&A happens. Clearly we are seeing a lot of M&A outside of real estate. Cash-rich private equity businesses are taking advantage of the uncertainties happening, and spotting opportunities in firms suffering from share illiquidity.”
Méka Brunel, chief executive of French REIT Gecina and a non-executive director of Hammerson, said a rise in M&A is likely as the industry works though the Covid-19 pandemic – but that only savvy buyers will be able to make the most of the opportunities.
“Each time you have a crisis, you have also a consolidation across all kinds of industries,” Brunel said. “The difference between today and the past is that you cannot only be a vulture kind of fund, but you need to be capable of understanding the underlying asset and you need to be long-term.”
She added that in the case of Hammerson, she believes Lighthouse Capital “are long-term and they understand what the business is about”.
Additional reporting by Pui-Guan Man
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