Private equity giant Blackstone is looking to exit the European operations of the Australian-founded Valad Property Group, which it has transformed into one of the continent’s most active real estate fund managers.
Valad was one of the leaders of the Australian charge into offshore property markets and bought British-based property funds group Scarborough for $2 billion in 2007, but was caught out by the global financial crisis.
Blackstone swooped on Valad, which includes an Australian business as well as the European funds operation, in 2011 in a play valuing the company at about $810 million.
The private equity giant has now appointed investment bank UBS to advise on the sale of its holding in the European arm, which it owns through the Blackstone Real Estate Partners VI fund.
The American investment powerhouse is thought to be looking to sell that business, which has grown to become one of Europe’s major real estate fund managers, as a whole to capture the value in the management platform.
The buyer of Blackstone’s majority stake — Valad’s management is also thought to have an interest — would gain control over the expansive European business.
Meanwhile the Australian business would be left to set its own course as it is run separately.
“I think the big value item is the European platform,” one property executive said.
The European sale process is not expected to be completed until later this year or early 2015.
Since taking over Valad in 2011 and delisting the company, including its European arm, Blackstone has dramatically expanded in Europe under the watch of Valad Europe chairman Martyn McCarthy.
Over the past three years, the real estate powerhouse has scooped up investment mandates from pension funds and wealth managers to build up a €4.9bn ($7.06bn) commercial property portfolio that holds interests in about 430 properties, as well as a development pipeline with an end value of €1bn.
Valad’s Europe business has also been involved in managing and trading more than €3bn in poorly performing bank loans and parcels of commercial mortgage-backed securities.
The Edinburgh-based Valad Europe now has 22 offices in 13 countries, including a sizeable business in England and Poland.
Meanwhile, the group’s Australian business is being refashioned under local chief executive Nic Lyons. While he declined to comment yesterday, Valad and its funds are offering a series of legacy assets for sale in Australia and switching focus to managing Blackstone’s swelling local property portfolio.
Outside of its Valad business, Blackstone has built up a significant portfolio of commercial property in Australia through a range of deals, including its recent $826m purchase of office and retail properties owned by Mirvac. It has also picked up Top Ryde Shopping Centre in Sydney’s northwest and Melbourne’s Greensborough Plaza, along with smaller retail assets.
The group is widely expected to make further property buys in Australia after $US4.4bn of institutional money poured into its first Asia real estate fund.
Valad has been selling down parts of a local portfolio that stood at about $600m when Blackstone took it over. Holdings then included office, industrial, retail and hotel properties as well as a residential development business.
The accounts of Valad Funds Management, the Australian operating entity of Valad’s local arm, show it held $239m of real estate investments.
It also manages several investments that are held in separate funds, including a stake in Sydney icon Gold Fields House, which has just hit the market. The building — which is jointly owned by Valad, the V-Plus Core Fund it manages and Dutch fund APG — is expected to fetch more than $400m.