Lone Star is closing in on a decision over the future of its £2.3bn PRS company Quintain.
A Delancey-led consortium is the lead bidder to buy the company in a move that could double the size of its Get Living PRS platform. Buying Quintain and its 6,000-flat Wembley Park project, the largest PRS scheme in the UK, would solidify its position as the market leader in the emerging sector.
Backed by its partners Oxford Properties, Qatari Diar and APG, Delancey has pulled ahead of competition from LRC Group, Grand City Properties and Greystar.
However, there is still an equal chance that a refinancing of the company and its 85-acre scheme will take place, rather than a sale. Lone Star may push ahead with this option if it does not receive a final offer from Delancey that it considers suitable.
Interest from lenders
There has been strong interest from lenders looking to build their books in the fledgling sector. Existing lenders to the company include Wells Fargo, CPPIB, TH Real Estate, Venn Partners and AIG. Royal Bank of Scotland, Lloyds, HSBC and Barclays have all also stepped up their PRS activity in recent times.
A refinancing would allow Lone Star to take cash off the table while still maintaining further upside potential in the development project. However, the private equity firm and its billionaire founder, John Grayken, have taken a broadly bearish view of the UK market over the past year and have grasped the opportunity to divest where appropriate.
The sale process, which kicked off with the appointment of Eastdil Secured and Credit Suisse in March, is not expected to complete until towards the end of the year.
A prospective sale would result in a highly successful exit for Lone Star. It took Quintain private in 2015 for £1bn including around £250m of debt. It is estimated that it has invested around £800m since then, which would result in a profit of close to £500m. Its return on equity will have been further enhanced through the use of debt.
If a deal with Delancey and its partners proceeds, it is thought it would be the largest real estate transaction in the UK since Brookfield and QIA acquired Songbird, the once-listed company behind Canary Wharf, in a £2.3bn take-private deal in 2015.
Focus on PRS
Delancey has been increasing its focus and capital expenditure on the PRS sector and is selling out of luxury London residential schemes – 185 Park Street, SE1 and The Kensington on Kensington High Street, W8. It is also taking advantage of the insatiable demand in the logistics sector by selling its £400m db symmetry platform.
Get Living currently has around 2,000 operational flats in its portfolio, all of which are in London between the Olympic Park in Stratford, E20 and Elephant and Castle, SE1. Both of those locations have potential for expansion and Get Living has a further pipeline of around 6,000 flats.
It is developing schemes in Glasgow and Leeds and is in the process of buying a 546-flat, £200m project at Middlewood Locks in Manchester. In Birmingham it has been shortlisted for the £1bn regeneration of Smithfield where the 2,000 flats planned are expected to include a large PRS element.
See inside Wembley’s flats:
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