In late May, The Blackstone Group, the world’s largest alternative investment firm, was understood to be exploring an initial public offering (IPO) of its European logistics business for an eye-watering figure of approximately $11 billion, including debt.
The London-based logistics business, which has warehouses in the UK, France, Germany and Poland, has around 137 million square feet of rented logistics space with tenants such as Amazon.
Logicor’s massive scale – and its rumored valuation – is considered remarkable for a company that was only founded by Blackstone’s real estate division in 2012.
“What is really remarkable about this (deal) is the astonishing growth of this platform within the past couple of years,” said Logan Smith, head of logistics at BNP Paribas. “They are at the point now where Logicor’s AUM and Prologis’ AUM are about equal. That is astonishing when you consider that Logicor did it in three years, and Prologis took 15 years.”
He added: “The management teams of both companies are extremely strong, but the strategies have been slightly different with Blackstone relying more heavily on third-party acquisitions.”
But industry insiders, one of whom described the deal as the “most obvious secret in the industry,” are divided over whether the IPO will actually happen.
One market observer believes it is merely a rouse to enable a full sale. “It is not an unusual tactic for a large business in private equity ownership to look at considering a flotation as a means of generating interest for potential buyers,” he said.
The situation is reminiscent of Blackstone’s attempted IPO of its US-based logistics business, IndCor Properties. In September 2014, the firm initially planned to pursue a public listing and filed for an IPO with the US Securities and Exchange Commission. It was planning to raise about $1 billion through the transaction, which would have valued the company at approximately $8 billion.
Instead, two months later, Blackstone announced that IndCor had been sold to GIC Private, Singapore’s preeminent sovereign wealth fund, and logistics giant Logistic Properties for $8.1 billion, in one of the biggest property deals since the global financial crisis.
Completing an IPO at a time of relative calm in the global market might be an issue but can be overcome if the potential investor base is strong, believes Martin Penn, a partner and IPO specialist at law firm DLA Piper.
He said: “Getting an IPO away in a quiet market is possible but obviously more difficult. The key really is the strength of the investment proposition and, I think crucially, securing solid cornerstone investors who know the business and industry, who can get the right valuation on the real estate portfolio before it comes to market.” The stronger the reputation of the cornerstone investor, the more likely it will be able to convince other investors to join in on the deal, he said.
The deal is also an indication of the continued growth of the logistics sector over the last few years, as consumer trends such as e-commerce have powered the industry to new heights.
“There is a lot more interest right now in European logistics,” Smith said. The sector continues to grow by 10 percent a year, and it doesn’t look like it’s slowing down any time soon. Logistics and industrial real estate now constitute about 11 percent of commercial property.”
Should the IPO go ahead, with Logicor actually valued at $11 billion, it would be one of the biggest offerings in real estate, especially since the crisis, and would even nudge its way into the top 20 IPOs of all time. The top of that list is still the 2014 floatation of Chinese online e-commerce company Alibaba Holdings Group, which was eventually valued at $25 billion.