US 'stars' shine big on European property at year-end

Three investors, each with the word 'star' in their name, capped a very active year for US-headquartered firms in European real estate by claiming the three €1 bn-plus transactions reported during the final weeks of 2014.

The transactions involved portfolios of multiple properties rather than single trophy assets.

Lone Star, the private equity group from Texas, claimed the biggest deal and was one of the biggest spenders overall in the list of reported deals compiled by PropertyEU Research for the last two months of 2014.

LONE STAR
Lone Star acquired a mix of traditional retail and office real estate and hotels, residential and student accommodation in the UK for €1.3 bn in an off-market deal from two 2005-2007 vintage private equity funds managed by UK-based Moorfield Group. A few days earlier the US firm was picked as the buyer of Neinor, the property management arm of Spanish lender Kutxabank, as well as about 50% of its real estate assets for €930 mln.

During November, Lone Star placed a bet on recovery in the Dutch office market by acquiring a five-asset portfolio for an estimated €70 mln.

A prime example of Lone Star's eagerness to work with either 'forced' or at least 'motivated' sellers came last February when it acquired Coeur Défense, the largest office complex in Europe, from the note holders of the busted CMBS supporting the tower. The purchase price of €1.2 bn represented a 40% discount to to the €2.1 bn it traded for at the peak of the market in July 2007.

NORTHSTAR
The second transaction involved another US 'star', this time entering the European universe for the first time. US REIT NorthStar Realty Finance joined forces with London-based Cale Street Partners to buy a 186,000 m2 pan-European office portfolio for €1.1 bn on 24 December. The 11 properties located in seven European countries were divested by funds managed by SEB Immobilien.

NorthStar appears to be in a hurry for more. PropertyEU has learned that the REIT is also closing in on a €500 mln deal to take ownership of a mixed portfolio of 38 assets in Germany. Confirmation is expected before the end of January.

STARWOOD
Starwood Capital can be considered a veteran in terms of European real estate, but like its fellow 'stars', the private investment firm headquartered in Greenwich, Connecticut has no lack of appetite or firepower.

On 19 December Starwood Capital announced it proposed to acquire 106 properties in the Nordics - the largest in the region over the last 12 months - for about €1.2 bn. The transaction would mark Starwood Capital's entry into the Norwegian real estate market. It involves the DNB Nor Eiendomsinvest asset management platform and 27 properties, covering 215,000 m2, in Norway, plus the related acquisition of SveaReal Fastigheter in Sweden. Pangea Property Partners advised Starwood on the transaction, which is expected to close in January.

Starwood is believed to have received almost the same amount - €1.2-1.5 bn - for the sale of the French Groupe du Louvre hotel chain to Chinese hospitality conglomerate Jin Jiang International Holdings in November 2014.

The transaction follows Starwood Capital Group's November 2013 acquisition, through a controlled affiliate, of seven retail parks and shopping gallerias in Sweden from Kooperativa Forbundet (KF), owner of the country's second-largest supermarket chain, Coop.

'Following our successful entry into Sweden last year, we are now pleased to be expanding our Scandinavian portfolio through our first investment in Norway with such a strong platform of diverse assets,' said Zsolt Kohalmi, head of European acquisitions at Starwood Capital Group.

'Norway has an enviable zero net debt, as well as the highest GDP per capita of any country in Europe. The real estate market is also attractive from our point of view, with unemployment at 3% and very low vacancy levels providing compelling market fundamentals.'

AMERICAN CAPITAL KEEPS FLOWING
PropertyEU Research tracked additional large transactions during November-December by US-headquartered investors such as Northwood Investors; Kennedy Wilson Europe Real Estate and KSL Capital Partners. Altogether, US investors were directly responsible for more than €9 bn of investments during the review period.

However it is likely that the real figure is much higher. Commenting on JLL's latest Global Capital Flows report, Matthew Richards said that Asian investment in particular is big news, while US equity 'sometimes doesn't grab the headlines that it should.' This is because it may come indirectly in an LP format through large investment managers that are not necessarily branded as US firms.

Cormac Mac Ruairi
Senior editor