Starwood and Segro agree deals as commercial property heats up

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Dealmaking in commercial property is heating up, with private equity group Starwood announcing a £673.5mn acquisition of a large UK real estate portfolio and Segro agreeing to buy a smaller warehouse landlord on Wednesday.

Starwood announced a recommended cash offer for Balanced Commercial Property Trust, managed by Columbia Threadneedle, which includes a central London estate around St Christopher’s Place near Bond Street as well as warehousing and other assets across the country. 

The news came as listed warehouse landlord Segro reached a deal with Tritax EuroBox for a roughly £553mn all-share takeover, to capitalise on demand for logistics assets driven by the rise of ecommerce.

The transactions mark a pick-up in activity in the commercial real estate market following a bruising two-year slump that hit asset prices and depressed transaction activity. European commercial real estate dealmaking fell to a 13-year low at the start of the year, but deals have picked up since the summer.

Investors have moved to buy property vehicles trading at lower prices and wider discounts, with Segro raising £900mn of fresh equity earlier this year to target buying opportunities. Both deals announced on Wednesday were struck at a meaningful discount to the target company’s net asset value.

Segro chief executive David Sleath, said the acquisition of Tritax Eurobox, would add “a high-quality portfolio of big box warehouses in core European markets which would complement and enhance our existing assets”.

The transaction is the latest sign of demand for logistics assets, after Blackstone announced a roughly €1bn deal to buy a majority stake in another large European logistics portfolio on Monday.

There is also evidence of dealmaking in other sectors, with Brookfield this week putting London’s Citypoint skyscraper up for sale, for which it is hoping to secure £500mn. 

Many investors see logistic properties as the most attractive part of the commercial real estate sector owing to strong demand from the ecommerce industry. Warehouse prices have fallen less than other property types since 2022 and are also recovering faster. Asset values in the industrial sector, which includes logistics, gained almost 1 per cent in the year to June, according to a Green Street Index — a stronger result than other property types. 

Starwood managing director Matthew Parrott said its deal would “increase our exposure to logistics and other high-conviction sectors”. 

The Segro bid for Tritax Eurobox, which is backed by the smaller landlord’s board, came after a potential bid by Brookfield, which had expressed interest in the company and had been given until later this month to make a final offer.

Robert Orr, Tritax EuroBox’s chair, said the offer — at a roughly 27 per cent premium to its share price before the deal process began in May — “represents a compelling opportunity for Tritax EuroBox shareholders to achieve a significant and immediate uplift in the value of their investment”.

Starwood’s offer for BCPT represents a 21.5 per cent premium to the share price prior to the offer period. The trust looked for buyers after a strategic review in April. Paul Marcuse, chair, said a “significant proportion of the share register expressed to us a clear preference for a liquidity event, either via a sale or a managed wind-down”.