Blackstone’s $3.5b Logistics Portfolio draws bidders

12 February 2021

Blackstone’s $3.5bn Industrial portfolio has drawn interest from a large range of domestic and international investment managers and set the tongues wagging on pricing.

Charter Hall, GPT Group, Dexus, Centuria and Stockland are understood to be some of the local players who have been taking a look at the 45-asset portfolio. First round offers are due in by February 24th.

On offer is 1.4 million square metres of logistics property in Melbourne, Sydney, Brisbane, Adelaide and Perth, leased to the likes of Toll Group, WesTrac, Woolworths and the world’s largest operator of cold-storage Lineage Logistics.

Blackstone have invested heavily into the industrial sector over the past 5 years, buying up 5 portfolios trades and a number of single assets.

In July 2016, the Group paid $640m for 15 assets being sold by Goodman. The weighted average cap rate at the time for the portfolio was 7.4%. These assets would likely be priced near to 5.5%, valuing this portfolio in the order of $1.1bn. Blackstone acquired a 2nd portfolio from Goodman of 21 industrial assets in November 2016 for $645m. Again, this portfolio would likely be valued in the order of $1.1bn.

In April 2017, Blackstone invested $126m in acquiring 4 assets from Charter Halls’ Prime Industrial Fund at a passing yield of 7%. These assets included

  • 175 Eagle Farm Road Pinkenba QLD
  • 140 Robinson Rd Geebung QLD
  • 2 Interchange Drive Laverton North VIC
  • 5 Frederick Road Tottenham VIC

A month later, Blackstone picked up the Motor Accidents Commission portfolio which included 3 industrial assets worth approximately $64m. These assets included;

  • 105 William Angliss Drive Laverton North VIC
  • 2 Cyanamid Street Laverton North VIC
  • 28 Cyanamid Street Laverton North VIC

Then in October 2018 they invested $67m acquiring;

  • 46 Bessemer St Blacktown Nsw
  • 145 Hartley Rd Smeaton Grange Nsw
  • 18 Anzac Ave Smeaton Grange Nsw
  • 157 Hartley Rd Smeaton Grange Nsw
  • 23 Anzac Ave Smeaton Grange Nsw

And in late 2018, Blackstone spent $66.5m for a 6.4% passing yield on;

  • 102 Trade Street Lytton Qld
  • 323 St Albans Rd Sunshine West Vic

In total, 50 properties were acquired over this period worth $1.6bn. With rental growth and cap rate compression, these assets are now likely to be worth at least $3.0bn, effectively providing Blackstone with a compound capital growth rate of 15.3% pa which together with an average running yield of 8%pa wound likely provide Blackstone with a geared IRR in excess of 30%.

Blackstone have also been sellers of Industrial Property since 2017 and have disposed a number of portfolios including one acquired by Singapore’s Cache Logistics Trust in late 2017 for $170m (at 6.4% yield) and a second to Lineage Logistics for $345m in 2019 (at a 5% yield), but it would have been Mapletrees’ acquisition of 338 Brandman Street Acacia Ridge at a 4.9% yield in October 2020, which finally rang the bell for Blackstone and set the wheels spinning to sell the balance of the portfolio.

The current strength of the Aussie dollar is likely to make it difficult for offshore players to justify a direct interest in the portfolio.

To obtain best pricing for the portfolio, Blackstone are also considering an IPO of the portfolio which could obtain reconstruction relief on stamp duty with a pre-IPO placement to the best offshore bidders. In this case, Blackstone may retain a sizable investment and sell down in a more structured manner.

Blackstone have appointed investment banks Morgan Stanley and JPMorgan to assist them with an IPO Offer. The brokers have been out meeting funds on a global roadshow in the past few weeks and feedback has been that investors are hungry for more exposure to logistics assets.

The pitch is all about diversification, logistics, long WALEs and a National Tenant profile. Expect bids from $3.1bn.

Our Views

Whilst we do not hold all of the information on the portfolio however we would expect bidding to tap out at $3.5bn. Anything above $3.2bn would be a fantastic outcome for Blackstone and would have to reflect a cap rate of less than 5% which would be record breaking.

The Centuria Industrial REIT is Australia’s largest pure play REIT are currently trading on a distribution yield of 5.5%.

The Industrial market has certainly attracted significant interest as the economy shifts toward a more online e-commence environment. Q4 of 2020 saw in excess of $2.5bn of Industrial transaction across Australia.

Weighted Average yields in the sector have compressed from 7.7% in 2015 to a low of 5.0% in mid 2020. The current quarter shows yields softening however there is limited data in this quarter to suggest this is a widespread movement.