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Starwood Takes £100M Chunk In REIT As Investors Look To Public Markets For Value


Starwood Capital has become the latest private equity firm to take a significant stake in a listed UK property company.

Starwood has bought a 29.4% stake in London-listed RDI REIT, for which it paid South African investor Redefine £106M. It paid about 20% more than RDI’s share price before the deal was announced. Shares in the company rose by 11% when the deal was made public. 

The stake Starwood has bought is just shy of the 30% threshold at which it would be forced to make a full takeover offer for the company. 

RDI’s portfolio was valued at £1.3B at the end of March, 84% of which is in the UK and the rest in Germany. Its largest investment is in UK hotels, which account for 26% of its assets, and it also invests in UK retail, industrial, offices, serviced offices and German retail. 

A portfolio of four UK shopping centres it owned were put into receivership this year because the value had dropped significantly. Last year, Australian investor Cromwell walked away from a takeover proposal for the company, which has a market capitalisation of £311M. Shares in the company trade at less than half of its net asset value. 

Earlier this year, Brookfield’s latest opportunity fund paid £264M for a 7% stake in British Land, the UK’s third largest REIT. On a smaller scale, Tristan Capital has taken a 13% stake in McKay Securities, the listed property company with a portfolio across the UK and a £179M market capitalisation. 

Private equity firms are buying into listed companies because liquid public markets offer an opportunity to buy stakes in companies at prices that have dropped significantly in recent months, as a result of the coronavirus. There has not been significant distress yet in the market for direct assets, as few sellers are willing to trade at depressed prices.

While stocks might well rebound and turn a profit for investors, there is no guarantee. A cautionary tale is Orion Capital, which bought shares in shopping centre REIT Intu at a price of more than 100p, only to see its investment wiped out when the company went into administration last week.