Blackstone doubles down on Canadian industrial space
Blackstone Group LP is doubling down on industrial real estate by buying Gramercy Property Trust, the second multibillion-dollar takeover of a warehouse company in as many weeks with the growth in e-commerce raising demand.
Affiliates of Blackstone Real Estate Partners VIII agreed to pay $27.50 in cash for each Gramercy share in a transaction valued at $7.6 billion, according to a statement earlier this week. Gramercy, based in New York, has about $2.8 billion in debt, according to data compiled by Bloomberg.
Blackstone, the world’s biggest private equity owner of real estate, has stepped up its purchases in recent months. In March, the firm added 22 million square feet (2 million square meters) when it bought the Canyon Industrial Portfolio for about $1.8 billion. That transaction followed a January agreement to acquire Canada’s Pure Industrial Real Estate Trust in a $2.48 billion deal.
The shift toward online shopping has increased the need for warehouse space by retailers seeking to expand their digital operations and cut delivery times. That has lured investors into logistics real estate at a time when sales of other commercial property types have slowed amid concern over rising interest rates and a pullback in foreign investment.
Purchases of industrial buildings surged 34% in the first quarter from a year earlier to $20.9 billion, according to research firm Real Capital Analytics Inc.
Last week, Prologis Inc., the world’s largest warehouse owner, agreed to acquire DCT Industrial Trust Inc. for $8.4 billion in stock and assumed debt. Shopping at Amazon.com Inc. and other internet retailers still accounts for less than 10% of retail sales in the U.S., but e-commerce is reconfiguring supply chains.
“The quickest way to get access to more warehouses is to buy companies that own them rather than going through the development process,” Bloomberg Intelligence analyst Lindsay Dutch said. “[The Gramercy deal] is another demonstration of how strong demand is.”
Investors such as Blackstone are in a good position to snap up assets at a discount, Dutch explained. Warehouses in places like New Jersey and Southern California are especially prized for their proximity to high-population areas.
Industrial REITs remain one of the few real estate asset classes that’s experiencing “true market rent growth,” driven by fundamentals such as expansion in the economy, population, and e-commerce, SunTrust Robinson Humphrey analysts led by Ki Bin Kim wrote in a note to clients.