Blackstone and GLP announced today that they had reached an agreement for the New York-based alternative investment firm to purchase US warehouse assets from the Singapore-based logistics real estate firm for $18.7 billion.
The transaction, which comes just over one month after GLP was revealed to have begun filing for an initial public offering of its US assets, would be the largest private real estate transaction ever, according to a spokesperson for GLP, which is also known as Global Logistic Properties.
“Logistics is our highest conviction global investment theme today, and we look forward to building on our existing portfolio to meet the growing e-commerce demand,” said Ken Caplan, Global Co-Head of Blackstone Real Estate. ”Our global scale and ability to leverage differentiated investment strategies allowed us to provide a one-stop solution for GLP’s high quality portfolio.”
Blackstone Doubles US Logistics Portfolio
The deal would nearly double the size of Blackstone’s industrial portfolio in the US by transferring 179 million square feet (16.6 million square metres) of urban, infill properties to the New York-based firm’s holdings from three of GLP’s US funds.
Blackstone indicated that it was paying $13.4 billion to acquire 115 million square feet of the assets for its Blackstone Real Estate Partners strategy, while it was purchasing another 64 million square feet for $5.3 billion on behalf of its income-oriented, non-listed REIT, Blackstone Real Estate Income Trust (BREIT).
“These properties are a complementary addition to our stabilized commercial real estate portfolio, which is oriented toward our highest conviction themes, such as logistics,” Frank Cohen, Chairman and CEO of BREIT commented in a statement.
Buying Back Some Familiar Sheds
Blackstone’s team may already be familiar with many of the assets in its latest acquisition considering GLP’s largest single acquisition of US real estate assets was its $8.1 billion purchase of Blackstone’s IndCor warehouse portfolio in a transaction completed in 2015.
In that deal, GLP acquired a 55 percent stake in 117 million square feet of IndCor assets. The Singapore firm made a move to add to that portfolio in December 2016 when it launched a $1.5 billion fund aimed at US logistics acquisitions. GLP is understood to have sold off around $1 billion worth of lower performing assets from the original IndCor portfolio at the same time that it built its current US footprint, and is also said to have enhanced the yield of the remaining IndCor properties.
Blackstone cloned its IndoCor strategy in Europe, where it assembled the Logicor logistics platform before selling that 147 million square foot portfolio to mainland China sovereign wealth fund CIC for €12.25 billion (then $13.82 billion) in 2017.
With this latest transaction, Blackstone says that it has acquired over 930 million square feet of logistics globally since 2010.
GLP Maintains US Foothold, Looks for More
“GLP was able to leverage our deep operating expertise and global insights in the logistics sector within four years to build and grow an exceptional portfolio,” said Alan Yang, Chief Investment Officer of GLP,. “We are proud of the business our team built and are confident it will continue to flourish under Blackstone’s leadership.”
Yang also indicated that following this disposal, GLP would continue to look for opportunities to invest in the US market.
The warehouse sale would value GLP’s US warehouses, which currently total 187 million square feet, at just over $19.5 billion. Following the sale, the company led by longtime CEO Ming Mei will retain a US footprint of approximately eight million square feet, along with ownership of some logistics related technologies and operating businesses.
At the valuation of $20 billion which GLP was said to be targetting for its potential US IPO, the company’s portfolio, not including the techology holdings and operating businesses, would have been valued at just under $107 per square foot, or around 7 percent more than the price agreed to with Blackstone. The deal is also said to involve Blackstone taking over some debt associated with the GLP asset portfolios.
GLP Pays Down Buy-Out Hangover with US Sale
In seeking an IPO for its US assets, GLP was said to be planning to use the proceeds to pay down existing debt, much of was generated in a $11.6 billion management-led buyout of the company which was agreed to in late November 2017.
The sale to Blackstone allows the company’s current owners, which include China Vanke, Hopu Investment Management, Bank of China Group Investment and Hillhouse Capital Group in addition to Mei to sell off less than a quarter of GLP’s global warehouse footprint at a valuation more than 72 percent higher than what they paid to the entire company eighteen months ago, which then held assets in North and South America, Europe, China and Japan.
At $104 per square foot, today’s transaction represents an increase in capital value of more than 50 percent over the price that GLP paid to acquire the Indcor portfolio four years ago.
Kirkland & Ellis served as legal counsel to GLP while Eastdil Secured, Citigroup Global Markets and Goldman Sachs were the Singapore firm’s financial advisors. Bank of America Merrill Lynch, Barclays, Deutsche Bank, JP Morgan and Morgan Stanley served as financial advisors to Blackstone in the acquisition, while Citigroup Global Markets, Eastdil Secured and Goldman Sachs served as financing advisors. Simpson Thacher & Bartlett served as legal counsel to Blackstone.