Private Real-Estate Owner Expands Logistics Business Portfolio
Private-equity giant Blackstone Group LP has cut a deal to pay $1.5 billion for a portfolio of logistics centers, in the latest sign that this e-commerce-driven business is one of the hottest areas in the commercial-property industry.
Blackstone, the world’s largest private real-estate owner, has signed a contract to buy the 12 million-square-foot portfolio of mostly West Coast property from LBA Realty LLC, an Irvine, Calif.-based investment company with properties in the western U.S., according to people familiar with the matter.
Once closed, the deal will mark Blackstone’s biggest purchase of U.S. distribution centers since it exited from the U.S. logistics business in 2015 by selling IndCor Properties for $8.1 billion.
Investor demand for such real estate has shown unusual resilience during what many analysts and investors consider to be a late stage of a bull market for commercial property. Prices keep rising even as those in other commercial-real-estate sectors, such as office buildings and malls, have shown signs of cooling.
Executives at logistics companies say their businesses are benefiting from the growing importance of distribution in retail and other industries. Increasingly, business profitability is being determined by the efficiency, speed and costs of moving goods, they say.
Big private-equity firms like Blackstone and foreign investors such as Singapore’s GIC Pte. Ltd. and the Abu Dhabi Investment Authority have been among the most recent investors. Meanwhile, other investors such as private-equity giant TPG, LBA and Ross Perot Jr. ’s Hillwood Development Co. have been responding by putting logistics portfolios on the block. Hillwood sold a $1.1 billion portfolio earlier this month to Singapore-based Global Logistic, whose major shareholders include GIC.
The logistics sector’s strength is being fueled by rising demand for space from Amazon.com Inc. and other Internet retailers. Rents and occupancy rates are rising beyond the expectations of many analysts and industry participants.
Changes in the online retail business also have fueled demand for logistics space. As Amazon and others began offering faster delivery, they began looking for so-called in-fill properties closer to population centers that were partly designed to process individual packages rather than pallets of goods bound for stores.
TPG spent about $300 million of equity capital to build a portfolio of about 16 million square feet of in-fill properties starting in 2014, which it named Evergreen Industrial Properties. Earlier this summer, the firm hired Eastdil Secured LLC to sell Evergreen.
Blackstone was one of the early movers of the recovery in the logistics market. It built its IndCor portfolio through about 18 acquisitions, often buying buildings from distressed sellers like the Lehman Brothers estate. Blackstone cut a deal to sell IndCor to Global Logistic in late 2014.
Blackstone also owns 150 million square feet of logistics real estate in Europe that it accumulated during the recovery. The firm has been expected to try to sell it soon in an initial public offering but so far hasn’t announced its plans.