Four bidders have been taken through to the second round to acquire Lone Star’s £2.3bn Quintain, the country’s largest build-to-rent opportunity, including two would-be new entrants to the UK PRS market.
Delancey, in its Get Living PRS joint venture with Oxford Properties, APG and Qatari Diar; Greystar; LRC Group and Grand City Properties make up the competitors.
Delancey’s Get Living venture is the most established player nationally from the shortlist. The variety of giant pension and sovereign funds backing it means that it has huge firepower. Oxford has not yet completed its formation into the Get Living venture, but this is understood to be a formality and it is fully aligned with its partners on the Quintain bid.
Greystar has also been aggressively building a UK PRS portfolio in recent years. The US build-to-rent giant, which has a close relationship with Canadian pension fund PSP Investments, is in talks with backers to form a club to fund the deal.
LRC Group is a privately held investment management firm. Its headquarters are in Cyprus, and it has offices in London, Berlin and Amsterdam. It currently has a portfolio of around £3.5bn of assets under management. The investment firm typically pulls together clubs of private investors and has a large number of backers from Israel. It was founded in 1995 by Yehuda Barashi who is still a principal at the group and oversees all business activities and investor relations.
Lone Star has a close relationship with LRC, having sold the firm its last £600m tranche of UK hotels earlier this year. LRC is best known in the UK for its joint venture with rival bidder Delancey to develop Royal Mint Court, EC3 which is being converted into a new embassy campus for the Chinese government.
Frankfurt-listed Grand City is chaired by Israeli businessman Yakir Gabay and the company has a large amount of backing from Israeli investors. Grand City and its 38.1% owner Aroundtown have substantial residential interests in the more established PRS market of Germany and the Netherlands.
The process also drew interest from Lendlease with CPPIB, Invesco and Guy Hands’ Terra Firma, which did not ultimately make a bid.
Lone Star appointed Eastdil Secured and Credit Suisse to undertake a sale of the company in March. The top first round bid came in at slightly over £2bn but it is expected that the ultimate price paid will be close to £2.3bn. If Lone Star does not receive an appropriate bid it will retain the company and build out the project itself.
While no formal bidding timetable has been put in place, it is expected that second round bids will be called for in the next two to three weeks and a preferred party picked next month with completion most likely in the final quarter of the year.
The bids are subject to change and it is expected that they will move quite considerably as time goes on subject to the time of completion. This is due to the large amount of capital being invested by Lone Star into the project to build it out of more than £1m a day.
There has also been strong appetite to provide debt to finance the project as lenders become increasingly comfortable with the emerging PRS sector. While a straight sale rather than a refinancing of Quintain is still the most likely and preferred option by Lone Star, the level of interest from lenders is such that it would be possible for the private equity firm to pursue this route.
Existing lenders to the company include Wells Fargo, CPPIB, TH Real Estate, Venn Partners and AIG.
See inside Wembley’s flats:
To send feedback, e-mail david.hatcher@egi.co.uk or tweet @hatcherdavid or @estatesgazette
