Blackstone acquires Gramercy Property trust for $7.6bn

US investment giant Blackstone Group is betting big on global logistics with its acquisition this month of New York- based Gramercy Property Trust in an all-cash transaction for $7.6b, marking the second multibillion takeover of a logistics company in a matter of weeks.

Affiliates of Blackstone Real Estate Partners VIII agreed to pay $27.50 in cash for each Gramercy share. The transaction has been unanimously approved by Gramercy’s Board of Trustees, the company said in a statement, and represents a premium of 23% over the 30-day volume-weighted average share price ending 4 May 2018 and a premium of 15% over the closing stock price on 4 May 2018.

Gramercy invests predominantly in single-tenant industrial properties in the US and Europe, and, as of earlier this year, had a portfolio believed to span around 81 million sq.ft.

‘I speak for Ben Harris, Nick Pell and the entire team at Gramercy to say that we are very pleased to enter into this transaction,’ said Gordon DuGan, trustee and CEO of Gramercy. ‘We believe this validates the quality of the portfolio and platform that we have built. Entering into this transaction with Blackstone fulfills our Board of Trustees’ mission to maximize shareholder value.’

Investors flock to industrial assets

The explosion in e-commerce has redefined the logistics space as retailers expand their digital offerings, so it is no surprise that investors are keen to grab a slice of the ever-expanding pie. Blackstone, the world’s biggest private equity owner of real estate, has been on a major acquisition drive this year, snapping up the Canyon Industrial Portfolio’s logistics properties for around $1.8b in March as well as Canada’s Pure Industrial Real Estate Trust for C$2.48b in January.

Also, just last month (April), San Francisco-based Prologis Inc. the largest warehouse owner globally, agreed to buy its smaller US rival DCT Industrial Trust for $8.4bn in stock and assumed debt.

Blackstone has acquired more than 580 million sq. ft. of industrial space since 2010, including its acquisition of Gramercy, and continues to manage over 450 million sq.ft. Since selling its European logistics platform Logicor to China Investment Corp. in June last year for €12.25b (Blackstone later bought back a 10% share), the group has been rebuilding its logistics portfolio.

REITS holding warehouses and logistics centers have been outperforming those that focus on apartments or office buildings. Values for industrial buildings rose by 11% in April from a year earlier, according to a recent report by Green Street Advisors.

Gramercy has also been an active seller in recent months. Last year, it agreed to sell 100% of the funds of Gramercy Property Europe to a consortium of clients managed by AXA Investment Managers – Real Assets for around €1b, with an exit cap rate of approximately 6.2%.

Shareholders still to vote

Completion of the transaction, which is currently expected to occur in the second half of 2018, is contingent upon customary closing conditions, including the approval of Gramercy's shareholders, who will vote on the transaction at a special meeting on a date to be announced. The transaction is not contingent on receipt of financing by Blackstone.

Gramercy shareholders will be entitled to receive the previously announced second quarter dividend of $0.375 per share payable on July 16, 2018, and if the transaction is completed after 15 October 2018, Gramercy shareholders will receive a per diem amount of around $0.004 per share for each day from 15 October 2018 until (but not including) the closing date.

Morgan Stanley & Co. LLC is acting as exclusive financial advisor to Gramercy. Eastdil Secured LLC is acting as real estate consultant to Gramercy. Wachtell, Lipton, Rosen & Katz is acting as Gramercy’s legal advisor. Citigroup Global Markets Inc. and BofA Merrill Lynch are acting as Blackstone’s financial advisors in connection with the transaction. Simpson Thacher & Bartlett LLP is acting as legal advisor to Blackstone.

A global powerhouse

Such is the strength of Blackstone’s track record that its fund raising capabilities have become legendary. Last June, it raised €7.8bn for its fifth European opportunistic real estate fund, Blackstone Real Estate Partners Europe V (BREP Europe V), making it the largest ever dedicated European fund. Still, even that fund is dwarfed by Blackstone Real Estate Partners VIII, its $15.8bn fund launched in 2015, and which remains the largest real estate private equity fund in the US.

Earlier this month, Blackstone’s European Core+ platform acquired a residential portfolio in Berlin from a joint venture including KauriCAB Management and Apeiron/Ailon for an undisclosed sum. The portfolio comprises 2,500 residential units located in Berlin, the majority of which are concentrated in the prime inner-city districts, with additional units in Brandenburg and Magdeburg.

‘This acquisition is consistent with Blackstone Property Partners Europe’s strategy to acquire well-located residential properties in growth cities and to hold and manage them on a long-term basis on behalf of our investors,’ said James Seppala, head of European real estate at Blackstone. ‘Berlin continues to benefit from strong demographic and economic trends, and we are excited by the opportunity to expand our German residential platform in one of Europe’s most dynamic cities.’ CBRE and Hengeler Mueller acted for Blackstone and BNP Paribas and Greenberg Traurig advised the seller. (ssk)