EUROPE NEWS: Spend it like Blackstone

Speaking to PERE ahead of his June 25 appearance at the PERE Summit: Europe, Ken Caplan said The Blackstone Group continues to find value investing in Europe. He noted that the firm still is “excited” about the opportunity in the region, although he confirmed that “shifting sentiment” was taking place, with a greater number of investors interested.

Blackstone’s European real estate chief highlighted the differences between London, where the firm still is interested in deals, and Continental Europe. “I guess one could talk about the ‘weight of capital’ in a place like London, but it is not the same all across Europe,” he said. “Certainly, there are more people interested, but there still are a limited number of parties with the experience and necessary capital, particularly for large-scale distressed situations.”
Caplan continued: “One of the positives of having a functioning market is that sellers are more willing to transact. The debt markets are getting healthier, and we are seeing very interesting opportunities with solid fundamental value. Now, we also are seeing more things happening in southern Europe, whereas that was a really quiet part of Europe a year or two ago.”

Acknowledging Spain, Caplan referred to how Blackstone had invested in a few multi-family transactions, including a €125.5 million deal for 18 apartment buildings in Madrid in July 2013. “While we still are active and pursing opportunities in the UK, there has been a shift towards the Continent with more investments in Spain, Italy and the Netherlands over the past year,” he said.
Blackstone also has been “selectively” participating in nonperforming loan portfolios. In May, Ireland’s National Asset Management Agency announced that the firm had acquired the Project Tower loan portfolio, with a par value of €1.8 billion and secured by assets under the control of the O’Flynn Group.

Core-plus business

Perhaps the most eagerly-awaited update is on Blackstone’s new core-plus business, which is being run adjacent to its opportunistic fund series. In London, the firm is looking to staff up via a mixture of existing internal resources and external hires.

“This is an exciting new area, and we have started adding people to the team,” said Caplan. “We have the advantage of being able to leverage our existing team and expertise, which makes this a natural activity for us, but we are not going to compromise our existing business,” he vowed.

The first deal that Blackstone’s new platform has struck in Europe is the purchase of 125 London Wall, known as Alban Gate, from The Carlyle Group. “It is really a gateway city strategy involving light value-added,” Caplan said. “There are situations like Alban Gate, where you have a well-let building and a lot of security of income but also an opportunity for doing further work to the building and improving the income stream. They are very good pieces of real estate that we think are a very good value, but they just don’t fit the bucket of opportunistic equity.”

For more on the PERE Summit: Europe, see our September issue