BlackRock’s takeover of MGPA confirmed

The addition of Asia- and Europe-focused private equity real estate firm MGPA by the world’s largest asset manager creates a combined real estate investment management platform with $25 billion of assets.

BlackRock, the world’s largest asset management firm with almost $4 trillion in assets under management, is poised for a major expansion in the real estate investment space as it acquires private equity real estate firm MGPA.

The two firms confirmed the deal in an announcement this morning, in which they described the tie-up as making BlackRock “a truly global real estate investment manager.”  In one swoop, BlackRock has expanded its real estate division from 150 staff to closer to 370 staff and from one focused on core real estate investments via REITs and open-ended funds, predominantly in the US, to one with value-added and opportunistic capabilities across Asia and Europe as well. MGPA operates from 13 offices in the two regions, and these will be added to the four US offices that BlackRock Real Estate operates.

No price for MGPA was revealed in the announcement, although BlackRock said the financial impact of the transaction was not material to BlackRock’s earnings per share. It has been reported elsewhere that MGPA could have cost BlackRock between $140 million and $200 million, although these figures have been thought to be too high. The deal is expected to close in the third quarter, subject to various regulatory approvals.

Jack Chandler, global head of real estate at BlackRock Real Estate, which sits within BlackRock’s $120 billion BlackRock Alternative Investors, said: “Today’s agreement advances BlackRock’s growth strategy in Asia-Pacific and Europe, where we are seeking to enhance our local offerings and build on the firm’s real estate experience. It further strengthens our ability to offer clients an unrivaled set of solutions to the challenges of a low-return, high volatility environment, including access to MGPA’s top-performing investment teams and exceptional capabilities in key markets.” 

BlackRock emerged as the preferred bidder for MGPA last month, but its bid officially was not made public until this morning. It was one of almost 20 organizations that expressed an interest in buying MGPA after boutique investment bank Berkshire Capital was appointed late last year to find a buyer. Among the other bidders was believed to be MassMutual, the US insurance business that owns Cornerstone Real Estate Advisors, another real estate investment management business.

MGPA is understood to have been keen to grow its platform and, amid a stuttering capital-raising market, it determined a sale was the best route. The firm has raised approximately $8.6 billion of equity through 11 private real estate funds since its formation in 2004. Since the start of the global financial crisis, MGPA has spread its capital-raising efforts to include separate accounts, spezialfonds and retail capital via REITs raised by Orlando-based CNL Financial Group. Access to BlackRock’s sizeable capital distribution network should facilitate further capital raising via its main opportunistic fund series.

Jim Quille, MGPA’s executive chairman, said: “We are pleased about the many compelling opportunities this combination offers to both our clients and employees. In BlackRock, we have found an excellent asset manager which with to partner and which has a deep fiduciary culture, industry-leading risk management capabilities and the same commitment we have to delivering superior investment performance to our clients.”