It was no secret that New York-based firm The Blackstone Group, had put its stake in Valad Europe on the block, but Brisbane-based investment house Cromwell Property Group never got mentioned by industry insiders speculating who would take control of the European real estate fund manager.
The process, which started in September, saw UBS appointed as advisor on the sale but also tasked with bringing in a new financial partner to the Valad management team led by chairman, Martyn McCarthy.
According to sources, the investors in Valad’s funds were kept in the loop throughout the whole process, and some were happy that the firm had begun looking for a long-term capital partner bolstered their commitments to the company.
Blackstone originally invested in Valad Europe as part of the purchase of the larger Valad Property Group of Australia in 2011 for $227 million and the assumption of A$600 million of debt. Valad Europe was originally acquired by Valad in 2007 and four years later its management teamed up with Blackstone to privatize the company.
Yet despite only inheriting Valad as part of a larger acquisition Blackstone has come out with a return of more than 3x, as its contributed price was around the €35 million mark, according to one market source. London-headquartered Valad was sold for €145 million but only about €115 million was actually payable for the EBITDA multiple, approximately 6.4x. Blackstone paid about €23 million for co-investment interests in funds.
One source said that while the sale and excellent return makes Blackstone “look cute”, the price was still “attractive” for Cromwell. Valad’s AUM was only €3.8 billion, but with an added €1.5 billion of committed but unspent capital to be deployed over the next 2 years under existing mandates. Plus Valad Europe has been very well supported by investors recently, with approximately €1.7 billion in renewed commitments since 2012.
In convertible bond issuance statement seen by PERE Valad said it aims to take advantage of European banks who are continuing to reduce their real estate exposure, and increasingly taking action to work out portfolios. “Valad Europe is taking advantage of its proven ability, value-add skill base and depth of banking relationships to build on existing bank workout mandates across Europe.” The new owners will also benefit from the Australian connection and at the time of the acquisition, Cromwell chief executive, Paul Weightman, said: “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 percent.”