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Starwood Capital begins €500m Euro industrial drive

The Greenwich, Connecticut-based firm has created a new company called MStar Europe to buy light industrial assets. Its first deal is set to be the takeover of Tamar European Industrial Fund.

Starwood Capital is embarking on a €500 million European industrial property investment drive funded from its $4.2 billion Starwood Fund IX.

The Greenwich, Connecticut-based firm’s first deal for a new vehicle called MStar Europe is be the takeover of the Tamar European Industrial Fund which has assets of around €161.7 million and for which a £53.5 5 million (€67.1 million; $90.8 million) offer has been recommended.

Starwood and its local operating partner in MStar Europe – London-based M7 Real Estate – are trying to take over the company via Lux 30 Starlight, a newly incorporated vehicle in Luxembourg by offering the £53.55 million in cash – a 7.74 percent premium to the company’s value at Friday’s closing price of the London Stock Exchange where it is listed.

Tamar has €67.2 million of debt facilities that are due for repayment in July 2015 and October 2016, added a statement. The proposed takeover of Tamar fits in with Starwood’s ambition to grow European industrial assets via MStar Europe which is a new company created between Lux Starlight owned by SOF-IX International otherwise known as Starwood Distressed Opportunity Fund IX, and London-based M7 Real Estate that hopes to build up €500 million of light industrial assets mainly in Germany, the Netherlands and France.

The creation of MStar Europe will be the second such joint venture reached between Starwood Fund IX and M7 Real Estate, following the June 2013 launch of the UK-focused MStar, which to date has acquired 27 assets.

M7 was initially started in London in 2009 and the company plans to expand by opening in Paris in the next quarter. The Paris office will add to a presence in Glasgow, Amsterdam, Frankfurt, Warsaw and Copenhagen.

The takeover has already been recommended given JP Morgan Cazenove and accountant BDO has been advising the Tamar board and said it considered the transaction terms to be fair. Shareholders that have already accepted the offer are Weiss Asset Management that acts on behalf of Brookdale International Partners, and Brookdale Global Opportunity Fund that represent 13.4 percent of the share issuance. Laxey Partners which owns 29.8 percent has issued a letter of intent to accept the offer.

For its part, Germany’s Patrizia Immbolien which has been managing the Tamar industrial fund since it took over Tamar Capital Partners last April, has been selling off assets to realize value for shareholders, meaning that it is becoming increasingly uneconomical to continue running it.

The Tamar European Industrial Fund was originally set up by Tamar Capital Partners led by Rob Brook in 2009 with backing from The Tavistock Group. In 2011, Tamar bought the company outright on the way to building up a portfolio of £600 million before Patrizia Immbolien bought Tamar. Brook stayed on and currently works for Patrizia.

In its latest market update in May, Tamar Europe Industrial Fund said that assets as of March 31 were £133.7 million (€161.7 million). The portfolio comprises 39 properties, 64 percent of which are in France, 14 percent in Belgium, 13 percent in Germany, 7 percent in Sweden, 2 percent in the Netherlands.

The fund has debt levels on its total property value of 55.5 percent. The loan-to-value covenants on the company's banking facilities currently range from 70 percent to 90 percent.

Following the takeover and change of control, Lux Starlight is not expected to make any significant change to the current strategy.