Blackstone sells Valad Europe to Cromwell for €145m

The deal, which will see Cromwell pay €145m (£107.96m), marks the return of Australian real estate investment trusts to international investing after years of retreat following the global financial crisis.

The deal, to be underwritten by a €150m convertible bond issue, will see Cromwell acquire the pan European funds management business from Blackstone Real Estate Partners VI and Valad Europe senior management.

The deal, which was finalised yesterday afternoon, and confirmed on the London Stock Exchange this morning. The purchase price reflects an EBITDA multiple of approximately 6.4x.

Cromwell is one of Australia’s leading property investment and funds management groups with a market capitalisation of €1.8 billion. The REIT in the ASX/S&P 200 Index,

Valad will continue to be run by the same management team led by executive chairman Martyn McCarthy, who have all committed to the future growth of the business under Cromwell’s ownership. Managing €5.3 billion of assets across 24 mandates in 13 European countries, Valad gives Cromwell an integrated pan-European real estate investment management platform that complements its existing funds management operations in the Asia-Pacific region.

Paul Weightman, chief executive of Cromwell, said: “The acquisition of Valad Europe presents the opportunity to acquire a successful, value add property funds management platform with scale across a number of geographies and sectors. The business is a strong cultural fit with Cromwell, is complementary to our existing funds management operations and furthers our strategy to increase the earnings contribution from funds management to approximately 20%.

“We welcome Martyn McCarthy and the rest of the Valad Europe team and look forward to continuing to grow the Valad Europe business, and to taking advantage of future opportunities across the two platforms.”

Valad’s McCarthy said: “We are very pleased to have in Cromwell a long term capital partner who is committed to funds management, and is supportive of our continued aspirations to deliver strong performance to, and alignment with, our investor and banking financial partners.”
The acquisition is conditional on Cromwell and Valad Europe receiving regulatory approvals from the UK Financial Conduct Authority and the Guernsey Financial Services Commission which is expected to be received by 9 April 2015.

Blackstone swooped on Valad, the Australian-founded investment group, in 2011 in a play valuing the company at about £426m. In October last year the private equity group appointed investment bank UBS to advise on the sale of its holding in the European arm, which it owns through the Blackstone Real Estate Partners VI fund.

Since taking over Valad in 2011 and delisting the company, including its European arm, Blackstone has dramatically expanded in Europe under the watch of Valad Europe chairman Martyn McCarthy.

Over the past three years, the real estate powerhouse has scooped up investment mandates from pension funds and wealth managers to build up a €4.9bn (£3.66bn) commercial property portfolio that holds interests in about 430 properties, as well as a development pipeline with an end value of €1bn.

Valad’s European business has also been involved in managing and trading more than €3bn in poorly performing bank loans and parcels of commercial mortgage-backed securities.

The London-based Valad Europe now has 22 offices in 13 countries, including a sizeable business in the UK and Poland.