Private equity (PE) is back on the prowl in the listed property space. After Brookfield’s expression of interest in Tritax EuroBox (EBOX) earlier this summer came Starwood Capital’s bid for Balanced Commercial Property Trust (BCPT) last week.
The listed sector has been trading at a discount to net asset value (NAV) since interest rates went up. Until this summer, Blackstone’s spring 2023 take-private of Industrials Reit, which was at a premium to net tangible assets, has been the only private equity bid in the space. The deals in the space have been between listed players using cash and shares, such as LXi and Londonmetric (LMP).
Interest rates are a significant factor in the re-emergence of private equity buyers, said Peel Hunt analyst James Carswell. “Yields have moved out quite significantly, [so] the spread between risk-free rates and property yields I think looks attractive again whereas 18 months ago it probably didn’t.” The BCPT offer is still at a 9 per cent discount to NAV, so there is plenty of value out there for those with bullish outlooks.