Max Property Group’s UK real estate company launched at the bottom of the market in 2009 is close to being sold to a fund managed by Blackstone.
The closed-ended investment company, which raised £220m from investors five years ago, is expected to be acquired for £447.7m (€556m) by Marina Topco, a company controlled by Blackstone Real Estate Partners Europe IV.
The sale of the property business will go ahead should more than 50% of votes be cast in favour at an extraordinary general meeting.
Max Property’s investment programme, including acquisitions and disposals, was initially expected to take seven and half years.
According to a statement, the board of Max Property “has concluded that the interests of all shareholders are best served with an earlier disposal in a single and fast transaction with low execution risk”.
The investment period came to an end in May this year and, according to Max Property, “the majority of the asset management initiatives have been completed and the portfolio has been substantially de-risked, with major refurbishment programmes at or near completion and void rates now significantly lower than at purchase”.
It concluded: “In light of this, coupled with the strength of capital currently flowing into the market, the question for the board has not been, ‘Will the property portfolios be sold’, but ‘When will they be sold?’
“It is also the board’s view that the prospects of achieving higher prices for the group’s investments over its remaining life, whether as a result of the market potentially continuing its rapid rise and/or through the results of further intensive asset management, are outweighed by the downside risks for shareholders from the execution risk and market risk arising from a phased disposal programme over approximately the next two years.”
Max Property said, should the sale be approved, the company will have exceeded a return threshold that equates to 11% per annum. It said Blackstone’s offer reflected a 22% increase over the net assets reported in its annual report in March.
The management team, which includes Nick Leslau and Mike Brown, and US hedge fund Och-Ziff are therefore set to receive 17.2% of the total surplus over net funds invested, amounting to £31.2m and £9.1m, respectively.
Max Property said Blackstone was “one of only a few substantial property investors with access to very significant financial resources and the management capability to immediately absorb some complex multiple asset management situations in a large and diverse group of assets”.
Ken Caplan, head of European real estate at Blackstone, said the proposed deal reflected Blackstone’s “continued confidence in the strengthening UK markets”.