Blackstone buying USD18.7 BN worth of Logistics Assets from GLP in world record deal

128's picture
Rank: Baboon | 149

Thoughts on this deal? Is this the pinnacle of the E-Commerce hype or just the beginning? How can they deploy that much capital that late in the cycle?

Comments (21)

Jun 3, 2019

Low cost of capital

Intrinsic value associated with scaling

"feedback loop" has been achieved. When you control enough product you can heavily influence the marketplace

Jun 3, 2019

Is this the same stuff they sold to them with the IndCor deal...?

Jun 3, 2019

Yes, I think it is a good portion of that portfolio they unloaded in 2014.

Jun 5, 2019

yes lol

Jun 3, 2019
128:

that late in the cycle?

You shush your mouth

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Jun 4, 2019

We've been in the "9th inning" of this cycle since 2016.

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Jun 4, 2019

So spot on

Jun 3, 2019

We're surrounded by pessimists

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Jun 3, 2019

Blackstone needs to deploy $ extremely fast, with their new funds they have to invest an absurd amount of dough into industrial real estate

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Jun 3, 2019

Was going to say, BX has been on an Industrial tear since acquiring Gramercy back in '18. Did they market their new funds as having high industrial allocations or something?

Jun 3, 2019

heard they have to pump insane allocation into industrial like $100m a week or something crazy.

Jun 3, 2019

Hate to hear it. For a while I think the beauty of industrial was that people like Blackstone and Carlyle WEREN'T buying it. Prices still traded at a sub-institutional level and you could buy direct from users or old rich guys without too many institutions jerking prices. Used to see value-add returns on borderline core acquisitions. They would just be short-term sale leasebacks with potential to push rents an absorbent amount after a few year. Or simply buying an industrial property from a user that planned to move-out and finding a larger, corporate tenant to backfill and replace whatever family business used to operate out of the property and jerking rents. You still see these deals out in the marketplace but it's getting bought up at faster and faster rates and seeing increasing competition.

Jun 3, 2019

Obviously huge, but this isn't the largest deal. That was stated incorrectly in Bloomberg (if that's where you saw it). The largest deal was their $39 billion purchase of the Equity Office portfolio in 2007.

The value of its property business more than doubled in 2007 with the $39 billion acquisition of Sam Zell's Equity Office Properties.

Though this Reuters link says it was $23 billion...

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Jun 3, 2019

I think they called it largest private RE deal (as opposed to a take private like EOP).

Apparently they are spreading the assets around into a couple of funds and their private reit - seems like some potential conflict of interest there?

Jun 8, 2019

What is the conflict of interest that you see?

Jun 9, 2019

I doubt it's a conflict of interest. When you buy a portfolio of this size, you can carve it up into different risk buckets and allocate it to different pools of capital with different risk profiles.

Jun 3, 2019

I'm not suggesting this would be the case by any means, but in theory: you have different buckets of capital that pay you differently. You could allocate the purchase price of assets in a way that works to maximize the promote to the firm as opposed to maximizing returns for all investors. There's potential that you are on the brink of a promote threshold in a fund so you allocate a little less of the purchase price to the assets going in there - OR, you have another fund that pays you primarily on cash flow or AUM, that would stand to absorb a higher purchase price...

Again not suggesting that this is the case, but risk profiles aren't always black and white and you likely have a bit of room to move around within appraisals. Outside of 3rd party appraisals, what mechanisms do they use to help align their incentives?

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Jun 4, 2019

From their website (BREIT): "Blackstone Real Estate's global opportunistic BREP strategy will acquire 115 million square feet for $13.4 billion and its income-oriented non-listed REIT, Blackstone Real Estate Income Trust (BREIT), will acquire 64 million square feet for $5.3 billion."

Link: BLACKSTONE TO BUY U.S. LOGISTICS ASSETS FROM GLP FOR $18.7 BILLION

Something to note - BREIT's portfolio is (was) 55% multifamily and 34% industrial. So I think they just have a strategy (industrial and multifamily) and are trying to focus on growing their positions in those asset classes rather than timing the market like a PE fund might try to do.

Jun 9, 2019
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