Blackstone and Primewest deals to press reset on real estate sector

Primewest directors John Bond, David Schwartz and Jim Litis.

The latest spate of major corporate deals in real estate is expected to create a reweighting of the entire sector, with Primewest and Blackstone both receiving top dollar for their portfolios in the past week.

Hong Kong-based ESR swooped on Blackstone’s industrial property company Milestone Logistics at the weekend, paying $3.8bn.

ESR was one of four final bidders.

The earlier understanding was that parties submitted final offers of between $3.1bn and $3.6bn for the real estate portfolio.

However, it is now known that the offering was split in two, where parties could bid for the real estate assets and the real estate management business separately.

Sources have told DataRoom that most parties ascribed a small or zero valuation for the management business.

Some have drawn the conclusion that ESR may have ascribed a far larger valuation to the management platform — potentially about $200m.

The offer blew the prospects of a float of Milestone, which was also under consideration by Blackstone, out of the water.

Meanwhile, Centuria Capital Group continues its run of mergers and acquisitions by announcing a $15.5bn merger with Primewest on Monday.

Primewest has tapped Moelis for advice, while Centuria is working with Morgan Stanley.

Centuria bought the majority of 360 Capital’s real estate management platform for $217m in 2016 and last year it purchased New Zealand’s Augusta Capital for $NZ130m.

While sources say the offer for Primewest is generous, analysts say it makes sense for Centuria and will be rewarded by the market.

The $581m Primewest is understood to have been searching for a suitor for some time and at one stage held talks with Growthpoint.

It is understood Primewest approached Centuria about the merger deal in recent weeks.

It sees Centuria keep to its recent promise made at half-year results of growing its assets under management by 50 per cent in the near term, with this deal taking the assets under its control from $10.5bn to $15.5bn.

Primewest shareholders John Bond, David Schwartz and Jim Litis, who own about 52 per cent of the company, will remain on the fund board and have two-year contracts in place with Centuria.

As part of the transaction, Primewest security holders will receive $1.51 per Primewest security, consisting of 20c in cash and 0.473 Centuria securities.

The company’s shares last traded at $1.465.

Meanwhile, shareholders in the AMP Capital Diversified Property Fund vote on whether Dexus will take over as manager on April 27.

The fund’s responsible entity recommended the Dexus proposal, even after AMP had sweetened its terms for unit holders. The unit holders are expected to vote in favour.