Monday, June 10, 2019

US Logistics Market Sees Billion Dollar Deals as Warehouses Change Hands Again

Investment Groups Gamble on Term Effects of e-commerce
Shipping News Feature
US – Back in March at the United Kingdom Warehouse Association (UKWA) Conference we heard details of the current, and upcoming, availability of warehouse space in Britain from Kevin Mofid from property agent Savills, and details of some of the major developments. It would seem this drive to create more, modern storage and transit space in the UK is being mirrored across in America, and once again the principal driver is e-commerce.

One body which is keen to invest in available space is US private equity company Blackstone which has just agreed an $18.7 billion deal to purchase 179 million square feet warehousing space in the US in a move that it says represents a vote of confidence in logistics, particularly with the growth of e-retailing. Blackstone Real Estate’s global opportunistic BREP strategy will acquire 115 million square feet for $13.4 billion and its income-oriented non-listed REIT, Blackstone Real Estate Income Trust (BREIT), will acquire 64 million square feet for $5.3 billion.

This massive investment occurred when Blackstone acquired the assets from Singapore based GLP, formerly Global Logistics Partners, which developed in turn by buying the property assets of the old ProLogis in China and other emerging economies. GLP then expanded into the US by buying IndCor for $8 billion, which in this property roundabout, was originally owned by Blackstone.

Whilst GLP retains around $8 billion in similar assets in the US these would seem to have less logistics exposure. In a global portfolio with $64 billion assets under management in real estate and private equity funds, its real estate fund platform is one of the largest in the world, spanning 785 million square feet. Last month GLP announced a new investment partnership with Allianz Real Estate, one of the world´s leading real estate investors. Allianz Real Estate committed $600 million to GLP’s funds in China and Japan, on behalf of several Allianz group companies.

So whilst GLP now has cash to further its Asian portfolio, Blackstone is backing the burgeoning market of home deliveries in the US. Ken Caplan, Global Co-Head of Blackstone Real Estate, commented:

“Logistics is our highest conviction global investment theme today, and we look forward to building on our existing portfolio to meet the growing e-commerce demand.”

Once again you cannot consider this particular market without hearing the name Amazon whispered in the background. Jeff Bezos’ runaway train of a company leads the sector by a huge margin when it comes to e-commerce and is a key customer for the fulfilment centres which are the hub of this trade. Amazon is a tenant of a plethora of such facilities across the western world.

For its part Blackstone has long been an investor in the sector, buying up much of the old Prologis and selling it on as IndCor and Logicor. It has acquired over 930 million square feet of logistics in the past decade in the US and elsewhere. The latest deal is an interesting insight as to how the major investment groups are gambling on the future of the market. The key, as ever, is when to get in and, more importantly, when to get out.

With this latest deal Blackstone has nailed its colours to the mast and shown its confidence in the short to medium term future of logistics in the US at the very least.