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Blackstone takes another Europe REIT private amid $12bn fundraise

As the New York-based firm looks to deploy its most recent European funds in the region, office REITs will be an attractive target given the pricing split between public and private markets.

Europe

Blackstone, a giant in the world of private real estate, has taken yet another public real estate investment trust private.

The Dream Global Real Estate Investment Trust announced last week that funds managed by Blackstone – through its private real estate funds – would buy the REIT for C$6.2 billion ($4.69 billion, €4.24 billion) in an all-cash transaction. The Toronto-based owner-operator held approximately 215 properties across Germany, Austria, Belgium and the Netherlands, equivalent to €4 billion in gross asset value, as of June 30, 2019. Its portfolio targets a 90-95 percent allocation to office and 5-10 percent allocation to industrial properties, according to its website.

The C$6.2 billion behind the acquisition came primarily from Blackstone’s opportunistic European real estate strategies, PERE understands. The firm is raising capital for Blackstone Real Estate Partners Europe VI, which has raised €12.21 billion against its fundraising target of €10 billion, according to PERE data. It previously closed on BREP Europe V in May 2017, exceeding its fundraising target of €7 billion by raising €7.86 billion. BREP Europe V – which has an investment period of 5.5 years slated to end in June 2022 – had $2.93 billion left to deploy as of June 30, according to Blackstone investment records.

Blackstone and law firm Simpson Thacher, which represented the investment manager in the transaction, declined to comment.

Thanks to the firepower of its record-breaking real estate funds, the firm has executed on a number of large take-private REIT deals in the past two years. In January 2018, the firm acquired the publicly traded Canadian industrial property REIT Pure Industrial for C$2.5 billion ($1.88 billion, €1.71 billion). Blackstone also took the Gramercy Property Trust private in a $7.6 billion deal in May 2018. Just a month later in June 2018, the firm announced it would acquire Spanish REIT Hispania for €2 billion.

Though there have been several REIT take-privates in Europe in recent memory, real estate research firm Green Street Advisors’ Peter Papadakos says privatization odds differ based on the property sector. More popular REIT sectors such as logistics and real estate alternatives like manufactured housing and healthcare have been trading at NAV premiums, making privatization less likely. Industrial REITs – which have been widely sought after – were trading at a medium premium of 8.3 percent as of July 31, 2019, according to S&P Global Market Intelligence.  Retail, on the other hand, has generally been trading at deep discounts, he said.

The biggest take-private opportunity is in the European office sector, according to Papadakos. The pricing split between the public and private market has led to a pick-up in the privatization potential, he said. London-based office REIT Great Portland Estates, for example, would be an obvious take-private target given its size, he added.