Blackstone Beefs Up US Logistics Portfolio

Banking, finance, and taxes

Published: September 30, 2019 10:45 am

Last Updated: January 30, 2020 3:15 pm

So far this year, Blackstone Group Inc. (NYSE: BX) has acquired some $24.6 billion in U.S. warehousing assets. In a deal announced Monday, Blackstone said it will acquire, through an affiliate, industrial real estate assets including an industrial operating platform from a subsidiary of Colony Capital Inc. (NYSE: CLNY) for $5.9 billion. Earlier this year, Blackstone paid Singapore’s GLP $18.7 billion for 179 million square feet of U.S. warehousing space.

The acquisitions, called infill logistics assets, comprised mainly of city-edge properties that are becoming increasingly important to retailers wanting to fulfill e-commerce orders. The infill properties are analogous to the “last mile” cabling of internet service providers who are angling for the opportunity to connect more customers to high-speed internet backbones. A logistical operation near a major city enables retailers to deliver e-commerce orders more quickly

The GLP acquisition brought Blackstone, the world’s largest alternative asset manager, a number of big-name customers, including Amazon, Whirlpool, FedEx, Home Depot, L’Oreal, UPS, Starbucks and Tesla. The Colony acquisition adds 465 light industrial buildings in 26 U.S. markets, with a particular concentration around Dallas, Atlanta, Florida, northern New Jersey and California.

Nadeem Meghji, head of Real Estate Americas at Blackstone, said:

This acquisition of high quality warehouses demonstrates our continued strong conviction in logistics and positive e-commerce trends. As retailers continue to shorten delivery times and expand their last mile footprints, we believe warehouses in dense population centers will continue to experience outsized demand growth.

In addition to the light warehouses, Blackstone is acquiring a 51% ownership interest in 4 million square feet of bulk distribution assets, along with the same operating platform as used in the 60 million square feet of light warehouses.

As for Colony, president Darren Tangen noted:

This sale allows Colony to both achieve compelling returns for our investors and generate significant liquidity, which among other uses, will help accelerate our ongoing transition into digital real estate and infrastructure.

Earlier this month at the Merrill Lynch real estate conference, Colony outlined its plans to grow its investment in digital real estate assets, including things like wireless towers, data centers and other digital assets to meet what it called the “macro demand” for a connected planet.

The companies expect the deal to close in the fourth quarter of this year, subject to customary closing conditions and including third-party consent for the sale of Colony’s 51% interest in the bulk industrial portfolio.

Blackstone’ stock traded down about 2.3% early Monday, at $49.09 in a 52-week range of $26.88 to $55.17. The stock’s 12-month consensus price target is $53.45.

Colony Capital traded flat at $5.90, in a 52-week range of $4.32 and $6.28 with a price target of $7.08.