Stability and certainty characterise the acquisition of Valad Europe by Sydney-listed Cromwell Property Group, David Kirkby, chief investment officer of Valad Europe, tells PropertyEU.
Stability and certainty characterise the acquisition of Valad Europe by Sydney-listed Cromwell Property Group, David Kirkby, chief investment officer of Valad Europe, tells PropertyEU.
Kirkby was commenting following the announcement that Australian REIT Cromwell Property is acquiring Valad Europe from a Blackstone fund and Valad Europe senior management for €145 mln. Valad Europe is a diversified European investment manager which manages €5.3 bn of assets across 24 mandates in 13 European countries. Click here for news of the acquisition.
PropertyEU asked Kirkby about the background to the deal and what effect it would have on Valad Europe's strategy and operations.
PropertyEU: Why sell to Cromwell about four years after Valad Europe's senior management and Blackstone Real Estate Partners VI bought the business from Australia's Valad Property Group (also owned by Blackstone)?
Kirkby: As a fund with a defined life term, Blackstone Real Estate Partners VI always intended to sell its interest in Valad Europe within a few years. We told our investors and stakeholders that from the very beginning. Also, Blackstone REP IV was a good solid partner but didn’t really expand the business because it is a fund itself. Now we have the opportunity with Cromwell to be a long-term stable partner who is not going to be traded at some state.
PropertyEU: When did you start marketing the business and how much interest was there among investors?
Kirkby: The process began in September last year when Blackstone and the senior management of Valad Europe appointed UBS to act for us and seek buyers. We then ran a pretty tight programme with a view to selecting a party before the end of December. There was broad interest in Valad Europe and it's fair to say this interest was fairly diverse. There were discussions with some of our existing investors; private equity firms from the US, Asian capital and from Cromwell Property Group.
PropertyEU: What was the senior management looking for in terms of a new partner?
Kirkby: One of the key criteria for us was a long-term capital partner as our investors want stability for our team and the funds we manage.
PropertyEU: What - in your view - drew Cromwell to Valad Europe?
Kirkby: The Australian market is relatively small but highly institutionalised with huge savings and pension investment capital that needs to seek good investments more broadly across the world. We have seen this with the big Dutch pension funds too. In this case, the link between Cromwell and Valad Europe definitely gives rise to the potential for capital flows going both ways between Europe and Asia-Pacific. In terms of operations, Cromwell doesn't have any people in Europe, but they have met the team and believe in it and are backing the team and our strategy.
PropertyEU: Apart from the potential for increased capital flows, can we expect any other changes in the way Valad Europe operates?
Kirkby: There will be no changes in terms of management or strategy; it's business as usual for us now that the ownership change is no longer hanging over our heads. In fact the really pleasing thing for us as an organisation is that our investor network continued to give us capital throughout the process.
In times of instability investors can sometimes turn off the equity faucet. This was one of my greatest feats as it happened before when we had instability in the business, years and years ago. This time we won more mandates and support; that was the wonderful achievement. Why? Because we informed our investors at a very early state, explaining every facet of the process and the timeline. There were no shocks for our investors. If anything, our investors said 'okay, that makes perfect sense so let's move on'.
PropertyEU: What markets are you keen on now that the issue of long-term ownership has been resolved?
Kirkby: We are probably going to expand in Poland and the Czech Republic. We have plenty of investment capacity and are probably going to look at some other sectors besides retail where we see value.
We love the Netherlands, where we have a great team and good investor support for the market. At the start of 2015 we launched a joint venture to build a portfolio of up to €500 mln in value called the Valad Netherlands Diversified Partnership (VNDP). The initial focus is the office sector as we love to roll up our sleeves for a value-add play. We are also looking at some of the other sectors and are pretty close on a few transactions.