The world’s largest alternative investment manager is the preferred bidder for Blanchardstown Centre, the 1.2 million square foot shopping complex in Dublin.
The seller, UK property development company Green Property Group, put the asset on the market in January, attracting three serious buyers. Green announced it was selling due to the amount of international interest as well as the site’s scope for development.
Aside from Blackstone’s €920 million bid, Chartered Land, backed by Morgan Stanley Real Estate Investment (MSREI), and Canadian Pension Plan Investment Board (CPPIB) were also vying for the center, which is the second largest in Ireland presently but with the development potential to more than double in size. Both Chartered Land’s and CPPIB’s bids are unknown.
But sources said Blackstone’s record and reputation, not to mention experience in closing deals quickly, has enabled it to maneuver itself into pole position.
Given that the firm’s real estate assets under management recently passed the $100 billion mark and its fifth and most recent European-focused vehicle attracted almost $5 billion, the firm is not exactly short of firepower either.
Yet, the firm's ample resources was not understood to be the main reason why it is pipping rival bids for the shopping center. At this point in the market cycle, sellers are looking at other areas to get confident of completing a sale.
One partner at a London-based law firm that specializes in similarly large deals believes there are a number of reasons why a seller might opt for a firm based on reputation, and most importantly, credibility.
“If a seller has to go back to the market there is a risk it will have to accept a lower bid. It might be nothing to do with the seller or the asset. So sellers will be keen to select a reliable counterparty,” he said. “It’s a small market, and sellers will not welcome the adverse publicity from a process not being concluded.”
The partner said he was involved in one transaction where the seller had a particular fund that they wanted to wind up and therefore certainty of execution was understood to be important. The lawyer, who was acting for one of the bidders, noted that the seller decided to go with his client, even though they were not the highest bidder, because they were seen as the most credible among the interested parties.
But aside from price, reputation and credibility, factors such as transaction structure, familiarity with a particular jurisdiction or personal business history can also sway a seller’s mind.
“In one case, the client highlighted that we had done a very similar deal opposite the same seller with the same seller’s lawyers, which was instrumental in our client securing the deal,” the partner said.
He added: “Every deal is different, but generally speaking, the fewer the restrictions, contractual or otherwise, you are placing on the seller and its ability to use the sale proceeds, and the cleaner the break which is being offered, the more attractive it’s likely to be to the seller.”
Blanchardstown currently has 176 retail units, 20 restaurants and a multiplex cinema. When Green launched it for sale, the firm announced it earned annual rent of €50 million and had 16 million visitors each year.
The site has a further 2.7 million square feet of space containing offices, a theater, apartments and a hotel. But there is potential to vastly increase its size as it has an additional 1.7 million square feet of land. The new owner would be able to add 600 homes to the project as well as more retail, office and leisure.
Interest in Irish retail has been high after April’s announcement by Ireland’s finance minister that the economy is set to expand by 5 percent this year.
The Blanchardstown deal, if completed, would mean that three of the biggest shopping centers in the country will be controlled by overseas buyers. Hammerson picked up the current largest complex, Dundrum, in Dublin, and US investor Hines has taken a majority stake in Liffey Valley Centre, also in the Irish capital.
Blackstone and Green declined to comment.