Real Estate

Blackstone makes £1.2bn offer for St Modwen

Blackstone has made a £1.2bn approach to buy a logistics and housing developer as the private equity firm aims to increase its exposure to sectors that have boomed during the pandemic. 

The offer for St Modwen Properties, announced on Friday, valued the company at about £1.2bn, a 21 per cent premium to Thursday’s closing share price of 448p and a 2 per cent premium to pre-coronavirus highs. 

Shares in St Modwen rose 20 per cent to 535p when the market opened on Friday.

The FTSE 250 company has three business lines, including a logistics development and management business with enough land to develop 19m sq ft of warehouse space in the next few years. 

The logistics sector has been one of the winners of the pandemic and a big target for Blackstone. 

Delivery and storage networks have been called into action as a huge number of shoppers have moved online, and bidding for sites has been competitive as investors increased their exposure to a sector seen as a relatively safe source of long-term income.

Through its subsidiary Mileway, Blackstone has snapped up warehouses across Europe in the past two years. James Seppala, head of Blackstone real estate in Europe, has described logistics as “one of our highest conviction, long-term investment themes”.

While landlords in other property sectors — most notably retail and hospitality — have been pummeled by the pandemic and faced significant rent falls, owners of warehouses have recouped almost all they were owed. 

St Modwen has housebuilding and regeneration divisions, but the company’s extensive logistics development pipeline was likely to have interested Blackstone, said Miranda Cockburn, an analyst at Panmure Gordon.

“Any company with the ability to develop into the strength of demand [for warehousing] will do well in the next few years,” she said. “Pulling together a land bank is not easy and land values for industrial land have gone up massively in the past few years.”

The move was the latest in a series of bets on the UK by Blackstone, which is banking on a recovery as Britain emerges from the turmoil caused by Brexit and the pandemic. The buyout group’s global head of infrastructure Sean Klimczak told the Financial Times last year that it was “quite bullish” on the UK, which it saw as “undervalued” and a “significant opportunity”. 

Other UK deals included buying Bourne Leisure, which runs the Butlin’s and Haven holiday parks, and IQ Student Accommodation, which it acquired last year for £4.7bn. It has made plans to use money from a $14bn Saudi-backed infrastructure fund, much of which was originally intended to target the US, for UK investments.

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