INTERVIEW: Blackstone feeds on distress

In an exclusive interview with PropertyEU, Kenneth Caplan, senior managing director and head of real estate in Europe at Blackstone, gives his view on the best investment opportunities in Europe.

PEU: Where do you see the best investment opportunities in Europe?

Caplan: We’re active across Europe, from Ireland to Turkey. For us, the best investment opportunities are related to distressed assets and the deleveraging we’re seeing across Europe. Last year, we saw a significant increase in our activity as a result of the distress starting to work through the system and that has continued in 2013.

Most recently, our acquisition of the art deco Adelphi offi ce building in London closed last week (reportedly acquired for around £265 mln, although Blackstone has not disclosed the price). It feels like we are in the early stages of the opportunity in Europe. Also, at the end of last year, we acquired the Burlington Hotel in Dublin (from receiver Grant Thornton) for €67 mln, 80% less than the property sold for six years ago. This year, we intend to spend €16 mln on refurbishing it and rebranding it as a DoubleTree by Hilton.

A lot of investors are understandably risk-averse today, but this is the area where we think we can generate attractive returns. We’re also very active in markets such as France and the UK, taking leasing risk for the right properties in the right locations. In addition, we’ve been investing in Poland and Turkey for the past two years and although the demographics are diff erent to core European markets, the opportunities have been driven by the same dislocation and change of capital flows. We’d like to do more in Turkey if we can, especially on the retail side, as we’ve seen year-over-year footfall at our properties increase by 15%. We particularly like the larger, better centres that have some type of problem that needs to be fi xed. Generally, those problems are related to too much debt, stability or ownership
issues.

PEU: Are there any new markets/asset classes on your radar?

Caplan: Yes, we’re looking at new markets and opportunities. In addition to Poland and Turkey, which are relatively new markets for us, we’re also spending more time in countries like Spain and Italy given the distress, lack of capital and adjustments underway. That said, I expect we’ll continue to be most active in the core European markets given the size and depth of those markets.

The full interview is available for premium members in the attachment below.