InvestmentsJul 22 2014

Blackstone buys £448m Max Property Group

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Nick Leslau, the property entrepreneur, has agreed to sell one of his listed property companies to Blackstone Real Estate Partners in a £448m deal, but insists that he is not calling the top of London’s commercial property market, reports Claer Barrett.

Aim-listed Max Property Group, which was set up in 2009 to take advantage of weak conditions in the UK commercial property market, was the largest European IPO of that year raising £211m from investors including Och-Ziff, the US hedge fund.

It was originally conceived as a seven-year vehicle, but Mr Leslau and his long-term business partner Mike Brown said they had no qualms about selling up two years ahead of plan.

The valuation reflects a 22 per cent premium to net asset value (NAV) reported in the group’s annual report in March, before management incentive provisions and exit costs, and reflects a 112 per cent increase in NAV over the five years since Max was listed.

Mr Leslau said: “Are we calling the top? Absolutely not. As Baron Rothschild once said, I got rich by selling early. Blackstone has massive financial resources and has made a knockout bid, so we’ve gone earlier than we thought.

“I do think the market is discounting all risk at the moment, and there is undoubtedly an exuberance out there. That’s not to say it isn’t justified, but we have a seven year life cycle. We’ve been offered tomorrow’s jam today, so we took the decision to get out.”

The deal will see MPG opco, a wholly owned subsidiary of Max which owns the entire property business of the group, sold for £414.2m in cash. The price excludes a £33m cash dividend being returned by the company to shareholders on Wednesday.

The sale must be approved by more than 50 per cent of shareholders at an emergency general meeting on August 11, but the company said holders representing 46 per cent of the shares had already undertaken to vote in favour.

This includes Och-Ziff, which owns a 16 per cent stake, and Prestbury, Mr Leslau’s main company which owns 11 per cent.

The incentive arrangements put in place at the time of Max’s listing, requiring the company to return the original £211m capital plus returns equivalent to 11 per cent per annum, have been met under the terms of the deal.

This will trigger an incentive payment of £40.3m to the management team and Och-Ziff, who were the company’s cornerstone investor, following the completion of the deal.

The net cash return to shareholders is expected to be 184.2p per share, representing a premium of nearly 19 per cent to yesterday’s closing price.