INTERVIEW: Real estate raider with a nose for trouble

US private equity giant Blackstone’s latest coup is the acquisition of Dutch retail developer Multi Corporation’s debt paper

In just over two decades, Blackstone has become one of the major forces shaping the global real estate industry. The private equity giant was set up in 1985 by Stephen A. Schwarzman and Peter G. Peterson.

The company has been active in real estate since 1992 and claims to be world leader with $55 bn in assets under management. The company founded its European business in London in 2000. Two years later, it was already cashing in on $1 bn of management contracts. A year after the Lehman crisis, Blackstone secured an A rating from Standard and Poor’s and an A+ from Fitch. Arguably even more impressive was the firm’s ability to raise €3 bn for Blackstone Real Estate Partners Europe (BREF III), making it one of the leading investors in the European market. In Europe, Blackstone committed €2.7 bn to real estate transactions in 2012 after forking out €2.3 bn the previous year.

In the final quarter of 2012, the company acquired the Burlington Hotel in Dublin for €67 mln, 77% less than the price paid in 2007. Blackstone has been more active in London. In November it zeroed in on the Art Deco Adelphi building overlooking the Victoria Embankment and the €320 mln purchase from Istithmar of Dubai is due to finalised in Q2.

Blackstone is not the only US marauder in Europe: Lone Star and Cerberus are charting the same course. So far, however, Blackstone has been catching the bigger fish. In April, it emerged that Blackstone has acquired a large portion of Dutch developer Multi’s debt. The news followed hard on the heels of a move by the US group and Canadian firm Ivanhoé Cambridge to increase their share of Gecina’s debt to nearly 65%, paving the way for an equity stake in the French REIT. That move followed an initial acquisition by the two parties in November 2012 of a 40% stake in loans made to Gecina, representing a potential 12% stake in the Paris-based office landlord. Blackstone is now believed to be seeking ‘substantial’ control of the Dutch developer. In both the Gecina and Multi cases, Blackstone is seeking to relieve cashstrapped banks looking to diminish their exposure to real estate. Market watchers believe Blackstone is interested in picking the best fruits in Multi’s basket of retail developments across Europe and adding them to the portfolio it has now built up in Turkey and Poland. In any case it is clear that is not one of its core competences. Earlier this year it commissioned UK developer Stanhope with Lend Lease as contractor for Building 7 in Chiswick Park. Scheduled for completion by end-2014, this is one of the biggest projects in West London with construction costs put at €94 mln.

Blackstone bought the office park in April 2011 for £400 mln. Blackstone is also building a presence in the European logistics market. In February, LogiCor - Blackstone’s newly created logistics platform - made its first foray into Poland with the acquisition of two portfolios totalling 402,000 m2 from joint venture partners Panattoni Europe and Pramerica Real Estate Investors.

The move follows a string of acquisitions in the past 12 to 18 months, in particular in France and the UK where the US private equity giant has bought logistics assets from Prologis and Gecina among others. And in a move signalling that an IPO may be in the works, Blackstone appointed former AMB Europe boss Mo Barzegar earlier this year as the new CEO and president at LogiCor.

Blackstone’s appetite for logistics assets in Poland was whetted by the retail portfolio it had built up in the country, Robert Dobrzycki, managing partner for Central Europe at Panattoni Europe told PropertyEU. It doesn’t require a huge leap of the imagination to understand why Blackstone may now be interested in taking over Multi. By doing so, BREF III would secure a steady inflow of new retail projects.

By Wabe van Enk and Judi Seebus

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