Blackstone’s $7.6bn take-private bid ‘a fair price,’ analysts say

The private equity giant’s per-share price offer for Gramercy is said to be higher than the NAV of the REIT’s underlying assets.

Blackstone shows no signs of slowing its US logistics appetite.

The New York-based firm is buying real estate investment trust Gramercy Property Trust in an all-cash deal valued at $7.6 billion, the firm said Monday. If approved by Gramercy shareholders, the deal is expected to close in the second half of the year.

A spokeswoman for Blackstone declined further comment.

New York-based Gramercy oversees an 81 million square feet US portfolio, 81 percent of which is in industrial real estate, with the remainder in office, according to the REIT’s website. The 362-asset portfolio is 97 percent occupied. Last May, Gramercy announced the sale of its European business to AXA Investment Managers – Real Assets for €1 billion, PERE previously reported.

The latest portfolio sold for a 5.8 percent cap rate, SunTrust Robinson Humphrey analysts Ki Bin Kim, Ian Gaule, Alexei Siniakov and Anthony Hau wrote in a research note Monday. The group said Blackstone’s offer was a “fair price,” based on the underlying net asset value of Gramercy’s properties. The analysts calculated that the NAV of Gramercy’s assets was about $25.53 per share, and Blackstone offered $27.50. Other REITs, particularly those focused on retail, are trading at a discount to NAV, sometimes depressing sale prices.

“Industrial REITs remain highly sought-after in the private/public markets as it is one of the few real estate asset classes that is experiencing true market rent growth, driven by macro (economy/e-commerce/population growth, supply chain reconfiguration) fundamentals,” the analysts wrote.

Blackstone inked the deal through its 2015-vintage global opportunistic real estate fund, Blackstone Real Estate Partners VIII, according to Monday’s statement. The firm has now invested $8.8 billion, or approximately 50 percent, of the $16.41 billion of committed capital in BREP VIII, according to Blackstone’s first-quarter earnings results.

Blackstone has been rebuilding its North America logistics presence since 2014, when the firm sold its 117 million square foot US industrial real estate business, IndCor, to Singaporean sovereign wealth fund GIC in an $8 billion deal, PERE reported at the time.

Including the Gramercy deal, Blackstone has acquired over 580 million square feet of industrial space globally since it began investing in the sector in 2010 and continues to own over 450 million square feet, a source told PERE.

In January, Blackstone’s core-plus platform, Blackstone Property Partners, made its first Canadian investment with the purchase of Pure Industrial Real Estate Trust in a deal valued at $3.8 billion. With the take-private transaction, which is expected to close this quarter, the firm is expected to add 175 properties to its logistics portfolio.

In March, the firm’s non-traded REIT, Blackstone Real Estate Income Trust, purchased a 22 million square foot portfolio of industrial assets for about $1.8 billion from private equity real estate firm Cabot Properties.

Blackstone’s head of Americas, Nadeem Meghji, said at PERE America in November that the firm has bet on consumers’ growing preference for e-commerce leading to a boom in the sector. In the US, he said Blackstone focuses particularly on last-mile infill locations and coastal markets.

US industrial real estate sales volumes continue to climb, hitting $77.2 billion in the first quarter, up 25 percent year-on-year, according to data provider Real Capital Analytics. The growth came largely from portfolio and entity-level deals, including Blackstone’s acquisition from Cabot, RCA said in a first-quarter report.