Blackstone offers to buy British developer in UK warehouse chase

London

BLACKSTONE Group funds have offered to buy St Modwen Properties, as the private-equity giant chases a bigger slice of the UK's red-hot warehouse market.

The British developer said it is likely to accept Blackstone's indicative offer of about £1.2 billion (S$2.2 billion) should it be made firm, said a statement on Friday.

St Modwen stock jumped as much as 20 per cent to 538 pence in early London trading, close to the offer price of 542 pence a share.

Competition for warehouses across Europe has intensified as global investors including Goldman Sachs Group, Cerberus Capital Management and GIC bet on rising rental income fuelled by demand from e-commerce retailers as the pandemic moved more shoppers online.

That is prompting rivals like Blackstone to turn to more complex deals including snapping up public companies as they look to build their warehouse portfolios.

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UK warehouse lease agreements reached a record in the first quarter, 40 per cent higher than a year earlier, said CBRE Group. That has seen the asset class easily outperform any other type of commercial property.

Blackstone has been racing to scale up its Mileway unit that focuses on urban warehouse properties close to population centres that are in demand from online retailers seeking to cut delivery times.

Recent UK deals include the purchase of a £473 million portfolio from Prologis in October and a £118.5 million deal for the Bedfont Logistics Park in March.

St Modwen has three main business units, focusing on housebuilding, warehouses and urban regeneration.

After shifting its focus towards logistics in the past two years, that unit now accounts for about 49 per cent of the company's £1.37 billion portfolio, said a February earnings statement.

The rest is split almost equally between its house building arm and the strategic land and regeneration unit which the company has been shrinking.

"Blackstone is more comfortable than most to look at take-private opportunities and St Modwen's legacy home building business muddied the waters for other parties only interested in the logistics portfolio," Green Street analyst Peter Papadakos said.

"Let's see if the share price stays above the bid price - it may signal the public market's expectation of a bidding war should it do so."

St Modwen's strategic land unit, which buys sites and takes them through the planning process to prepare them for development, would also provide a ready supply of opportunities for Blackstone to build more warehouses.

Blackstone has until June 4 to make a binding offer for the company, under the UK's takeover rules. BLOOMBERG