Blackstone Goes Shopping in Singapore for $651M Japanese Retail REIT

The world’s largest alternative investment firm headed to Singapore’s stock exchange this week and on its shopping list was a portfolio of 11 Japanese shopping malls, according to an announcement this week by Singapore-listed REIT, Croesus Retail Trust.

Affiliates of Blackstone Real Estate have made a S$900.6 million ($651 million) acquisition offer for all the units of Asia’s first retail business trust focused on Japan, as the New York-based private equity giant ramps up its portfolio of Asian retail and logistics properties.

The Japanese buyout bid follows a playbook that Blackstone has relied on previously to privatise retail REITs in the US that the investment firm sees as undervalued.

Blackstone Aims to Unlock Value of Japanese Retail Portfolio

Cyrus BidCo Pte. Ltd, which is incorporated by funds advised by Blackstone Real Estate, made the offer for all the units of CRT, a deal which will result in the trust being privatised and delisted from the Singapore Exchange.

Blackstone’s offer of S$1.17 (84.66 cents) per unit is at approximately a 38 percent premium over the 12-month volume weighted average price (VWAP) for the trust’s units. During the last week, units in the listed trust had been trading at around S$1.05 before closing yesterday at S$1.17 on news of the buyout bid.

“Croesus Retail Trust has an established portfolio of quality Japanese retail assets,” said Christopher Heady, Blackstone’s head of Asia real estate in a statement. “This transaction represents a good opportunity for Blackstone’s real estate business to further expand its platform in Japan and a chance to work together with the proven management team and staff at Croesus.”

CRT’s portfolio consists of 11 income-generating retail properties scattered across Japan, seven of which were acquired following the trust’s initial public offering in May 2013. The assets in Tokyo, Osaka, and other cities range from urban retail buildings to large-scale suburban shopping centers located near train stations.

In total the portfolio has a net leasable area of 426,101 square metres and an average occupancy rate of 98.1 percent as of June 2016, at which time it was valued at about 112.6 billion Yen ($1.1 billion). The properties are said to generate stable yields.

Investment Behemoth Takes Its REIT Buyout Game to Japan

Steven Schwarzman’s Blackstone, which had $102 billion of real estate assets under management worldwide at year-end 2016, has closed over $3 billion worth of acquisitions in Japan, including a residential property portfolio in Osaka and Tokyo that it was reported to be shopping to China’s Anbang Insurance for $2.3 billion last November.

By seeking to buy CRT, Blackstone is following a successful strategy it has pursued elsewhere for years, dating back at least to its lucrative purchase of Equity Office Properties, a US REIT, in 2007.

In 2011, Blackstone bought out Florida-based retail REIT, Equity One, to privatize a portfolio of 36 shopping centers in the southeastern for $473 million. The investment firm took the same approach again in 2015 in its $2 billion buyout of US REIT Excel Trust. That deal gave Blackstone at set of 38 community-based retail properties housing supermarkets, drug stores and department stores across the US.

In September 2015, Blackstone’s real estate arm bought out the shares in Chicago-based Strategic Hotels & Resorts Inc, a New York-listed REIT, in a cash deal valued at $3.93 billion. The PE giant then flipped that same portfolio — minus one of its biggest properties — to Anbang Insurance last year for $5.5 billion.

The world’s largest alternative asset manager is preparing to launch an Asia-focused fund of at least $5 billion targeted at retail and warehouse assets in China, India, Southeast Asia and Australia, it was reported this past January.