Blackstone's three major light industrial property acquisitions in the first quarter of 2017 form pillars for a new European platform, alongside the firm's existing ones for offices, shopping centres and logistics.
Light industrial real estate may, to the uninitiated, appear to be the junior cousin of the office and logistics sectors. For specialists, on the other hand, the often small-ticket, multi-let assets – used for all kinds of business and manufacturing processes – are a rich source of income when managed properly and grouped together to create scale.
Blackstone, the largest private equity real estate firm in the world with $102 bn (€95 bn) of assets under management, appears to espouse that view. The firm has embarked on an aggregation process this year that will likely lead to the formation of a pan-European ownership and management platform for light industrial property.
New platform
At the beginning of 2017 the New York-listed private equity fund manager acquired a 26-asset light industrial portfolio in France for €112 mln. The vendor was a joint venture between Starwood Capital and operating partner M7 Real Estate. Blackstone retained M7 as asset manager, and the pair said they would consider extending their new joint venture and potentially establish a pan-European platform by carrying out further acquisitions.
This became a reality in March when Blackstone and M7 – acting under the banner of the ‘Onyx venture’ – agreed to acquire two large portfolios of light industrial from UK REIT Hansteen for €1.28 bn. The sale covered 100 German assets, valued at €887 mln, and 71 assets in the Netherlands, valued at €308 mln. Hansteen, which is left primarily with €730 mln of assets in the UK, will return most of the proceeds of the German and Dutch sale to investors.
Morgan Jones and Ian Watson, joint CEOs of Hansteen, said, ‘The sale is in line with our long-term business and portfolio strategy of buying at a low point in the cycle, with low occupancy and rents, adding value through improved asset management and subsequently realising the investment at a higher point in the cycle.’
The price represented a premium of €76 mln (6%) to the year-end 2016 valuation, which itself included a valuation uplift of €34 mln over the valuation at end-December 2015.
The high price would suggest Blackstone is not expecting to flip the assets, and instead has a longer term strategy. Further confirmation came the day after the Hansteen deal when the Onyx venture added a further 26 Dutch assets for €130 mln. The vendor of the 264,000 m2 portfolio was MBay, a joint venture of M7 and Bayside Capital, a subsidiary of global private equity firm HIG Capital.
The property deals were carried out by HIG’s European team, led by Riccardo Dallolio, head of HIG Realty Partners in Europe: ‘We started an aggregation strategy in 2013 and acquired properties, which we thought were undermanaged, during a phase in the Netherlands when yields were high and vacancy rates were also historically high’. Discussion in regard to the country was less optimistic, Dallolio noted, as economic growth and availability of financing was lower than it is now. ‘We had the assets for three years and carried out asset management before Blackstone acquired the portfolio from us. It was a timely exit,’ Dallolio added.
Other sectors
The addition of light industrial means Blackstone has a European platform for all main property types. While the firm is mulling whether to sell or IPO Logicor, its €12 bn platform for logistics, it has launched a new core logistics venture with Delin Capital. PropertyEU broke the news in March that about 24 of the 130 assets held by the Multi retail platform are going on sale. In April, Blackstone closed the €3.3 bn buy of IVG’s OfficeFirst business in Germany.
Photo: Hansteen's Dutch assets included a Business Park in Ridderhaven near Rotterdam
