Investor to pay £1.2 billion for logistics development company

Such is the demand from investors for a slice of the UK warehouse market that real estate investor Blackstone is happy to pay more than 20% over the market price for developer St Modwen.

The company has offered to buy the developer for £1.227bn – 21.1% over the market price of St Modwen the day before the offer was launched.

St. Modwen has three main business units, focusing on warehouses, urban regeneration and housebuilding. In recent years it shifted it focus toward logistics development and investment which now accounts for 49% of the company’s £1.37 billion portfolio.

Talking to Logistics manager for the soon to be published June property feature, Stuart Murray, development director at St Modwen said: “We have gone something of a revolution [in the last two years]and we are now delivering circa 2m ft2 of new space per year

“We diverted out of retail and office and rebranded our commercial arm as St Modwen Logistics as it is the area where we are most active and going forwards and that is not likely to change anytime soon.”

“We have a number of pipeline sites and a strategic land portfolio of some 6,000 acres – 50% of which is in the midlands. The sites are capable of delivering 1 m ft2 upwards on each site and we have 15 strategic sites at present.”

In its notice to accept the offer from Blackstone today the board of directors said: “St. Modwen Logistics consists of a growing and resilient income-producing portfolio focused on modern urban and big box warehouses and a land bank with the potential to deliver c.19m sq ft of new logistics space of which c.7.6m ft2 (representing 40% of the pipeline by space as at 30th November 2020) is committed or consented.”

Around c.60% (c.12m ft2) of the land bank does not currently have planning consent; specifically, c.30% of the planned development in FY23 remains subject to planning consent, rising to c.85% in FY25.

It was noted that delivery of this development potential will require significant additional capital, an acceleration in the pace of delivery from 1.2m ft2 in 2020 to up to c.2m ft2 per year from 2022, and further growth in occupier demand in the Midlands and West of England where St. Modwen’s land holdings are concentrated.

“The Company is on track to deliver 1.5m ft2 of new developments during 2021, of which 10% is pre-let, with a further 16% under offer. Of the 2020 completions 91% are currently let or under offer, up from 81% since February 2021.”

Blackstone has been very acquisitive in the last six months securing the Prologis Platform portfolio for £473 million in October and paying £118.5 million for Bedfont Logistics Park in March.