Starwood Capital has initiated the sale of the St Christopher’s Place mixed-use estate in London’s West End, aiming to realise value from a property trust it acquired at a discount to net asset value (NAV). The U.S.-based opportunity fund manager appointed Eastdil Secured and Savills to market the estate, which comprises 172 units across 40 buildings, predominantly located along a pedestrianised street just off Oxford Street. At the time of Starwood’s purchase, the estate was 98% leased, with a tenant mix of 41% food and beverage units, 23% retail, 21% residential, and 15% offices.

The sale will serve as a key test for the market’s appetite for mixed-use schemes where the primary income stems from retail and hospitality, particularly as recent buyer interest has been strong in West End office assets. Criterion Capital, led by Asif Aziz, has been reported to show interest in acquiring St Christopher’s Place for over £200 million, with the potential transaction expected during summer 2024.

Starwood acquired the estate through its purchase of the Balanced Commercial Property Trust (BCPT) in September 2024, a £674 million deal that valued the entire trust at a 9% discount to its NAV but represented a 25% premium over BCPT’s average share price for the three months before the sale announcement. BCPT’s portfolio, spanning about 4 million square feet, was valued at approximately £930 million and was diversified across industrial (35%), offices (20%), retail (20%), retail warehouses (14%), and alternatives (11%). The St Christopher’s Place asset alone accounted for a valuation of roughly £230 million at the time of acquisition, indicating that its sale could recoup around 40% of Starwood’s total outlay on BCPT in one transaction.

BCPT’s journey to this point began with the company's strategic review launched in April 2024, triggered by its shares trading at an average 36% discount to NAV over the preceding year. The board of BCPT explored various options including a managed wind-down of the portfolio, piecemeal asset sales, or a full disposal of the company’s shares or assets. Ultimately, the decision was made to sell the entire trust to Starwood, providing shareholders with an immediate cash value reflecting a 21.5% premium to BCPT’s closing share price prior to the offer, though at a discount to the underlying NAV.

Industry analysts suggest that Starwood’s acquisition and subsequent sale of key assets like St Christopher’s Place underline its strategic approach to unlocking value from diversified UK property portfolios amid challenging market conditions for listed real estate trusts. The balance between retail, hospitality, residential, and office exposures in such mixed-use estates presents both opportunity and risk, particularly given evolving high street dynamics and shifting commercial real estate demand.

In a broader context, Starwood Capital continues to expand its real estate footprint, as demonstrated by its other recent US-based acquisition of Fundamental Income Properties for approximately $2.2 billion. These moves are part of Starwood’s ongoing strategy to capitalise on opportunities across various sectors and geographies, leveraging its investment and operational expertise within commercial real estate.

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Source: Noah Wire Services