Deals

Blackstone meets aspirations with $3.8bn Canadian REIT buy

The firm is privatizing a logistics-focused REIT in a deal valued at $3.8bn just two months after Jon Gray said he would ‘like to do more’ in the country.

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Blackstone’s core-plus platform is making its first Canada investment in a logistics take-private, according to a Tuesday announcement.

Through Blackstone Property Partners, the firm is purchasing Pure Industrial Real Estate Trust in a deal valued at $3.8 billion. According to PIRET, it owned 175 properties as of December 18. The Toronto-listed REIT invests across Canada, with its largest concentration of properties in Ontario, and it also owns 26 assets across the US. The portfolio’s leverage does not exceed 50 percent.

A spokeswoman for the firm declined to comment beyond the announcement.

The deal is expected to close in the second quarter.

“If you look at what we’ve done globally, it makes sense – we really like the logistics sector,” a source close to the deal said of Blackstone’s rationale.

Blackstone began investing in Canadian real estate in the 1990s, including a 1995 investment in real estate company Cadillac Fairview and a pan-Canadian office portfolio in the 2000s, as well as work in the real estate debt space. Its current holdings also include five Ontario hotels, according to data provider Real Capital Analytics. The hotels were purchased as part of a 2012 deal to acquire Accor’s economy hotels division in the US and Canada for $1.9 billion.

Real estate head Jon Gray highlighted the benefits and challenges of investing in Canada at a Toronto real estate conference in November, including low cap rates. “I would like to do more here; it’s just a very competitive market,” he said. “There are some great cities that have this great tech creativity vibe and you have lots of in-migration. It’s a better national in-migration story [than the US], like Australia has.”

 

Blackstone launched its core-plus business in 2013. The following year, the firm launched an open-ended fund to invest in the US and Canada and opened a similar vehicle for Europe in August. The firm also manages a non-traded REIT with a similar risk and return profile. Overall, Blackstone had $14.8 billion committed to BPP as of September 30, according to its third-quarter earnings. The platform has generated a 12 percent net internal rate of return.

Overall, the firm managed $111.3 billion in real estate as of September 30.