Public to private in a pandemic: real estate’s £3bn+ takeover wave
A £188m private equity play for PRS specialist Sigma Capital Group last week marked the latest addition to a growing list of pandemic-era takeovers of listed real estate companies.
Private buyers have flocked to the public markets to pick up REITs and other real estate companies, many of which have looked undervalued by equity investors compared with the value of their assets, and some of which have struggled with various challenges during the events of the coronavirus crisis.
Data from Refinitiv shows that PineBridge Benson Elliot’s recommended offer for Sigma Capital Group means that there has now been comfortably more than £3bn of completed or pending takeovers of London-listed real estate companies since the onset of the pandemic in early 2020.
A £188m private equity play for PRS specialist Sigma Capital Group last week marked the latest addition to a growing list of pandemic-era takeovers of listed real estate companies.
Private buyers have flocked to the public markets to pick up REITs and other real estate companies, many of which have looked undervalued by equity investors compared with the value of their assets, and some of which have struggled with various challenges during the events of the coronavirus crisis.
Data from Refinitiv shows that PineBridge Benson Elliot’s recommended offer for Sigma Capital Group means that there has now been comfortably more than £3bn of completed or pending takeovers of London-listed real estate companies since the onset of the pandemic in early 2020.
The largest has been Blackstone’s £1.6bn move for St Modwen Properties last month – a deal that the target’s board has recommended and will put to a shareholder vote later this month.
Other notable transactions to have been sealed in recent months include Lone Star’s £647m takeover of McCarthy & Stone; the Wellcome Trust’s £506m purchase of Urban&Civic; and Starwood Capital Group’s £468m take-private of RDI REIT.
For some of the target companies’ leaders, private ownership will make a big difference to their long-term visions. Speaking as Urban&Civic announced its agreement with the Wellcome Trust in November, chief executive Nigel Hugill said the company’s new owner would provide the kind of “patient capital” that the equity markets cannot.
“We have never shied away from the fact that our projects are long-dated and that the duration of them, once established, is really considerable,” he said. “The returns that they generate for the owners of the equity are good. But there’s a fair amount of work involved in getting to that first spot.”
Analysts covering the listed real estate space expect such deals to continue. Berenberg’s Kieran Lee has highlighted Helical, Great Portland Estates, Capital & Regional and Empiric Student Property as potential targets.
There are still some questions over whether all the planned deals will go through. A €1.6bn (£1.4bn) unsolicited offer for Globalworth Real Estate Investments from existing shareholders CPI Property Group and Aroundtown has been described by the target as “materially undervaluing” the company.
Shares in St Modwen have consistently traded above the level of Blackstone’s 542p takeover offer since the recommended deal was announced almost a month ago, leading some analysts to suggest that a higher bid may be necessary to win shareholders around.
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