Categories Earnings, Other Industries

Blackstone’s buying spree continues with Gramercy deal

Blackstone today announced that it’s buying Gramercy Property Trust (GPT) for $7.6 billion. The private equity (PE) firm has agreed to pay $27.50 per share for the New York-based industrial REIT, which is 15% more than the Friday’s closing price of GPT. The deal is expected to be closed in the latter half of the year. Blackstone seems to be on the buying spree when it comes to the industrial properties. This is the third deal done by Blackstone in the last six months spending more than $14 billion.

Under the deal terms, Gramercy stakeholders will receive $0.375 per share as dividends. As scheduled, the company plans to announce its quarterly results on June 30. But due to the acquisition, it will not conduct the earnings conference call with analysts.

Blackstone Group (BX) claims to be the largest real estate PE firm in the world managing $120 billion worth of assets. Last year, the real estate business contributed more than half of the company’s pre-tax profits. Under the helm of Jonathan Gray, Blackstone’s real estate business has seen stellar growth. He has been credited for making landmark deals in the space with the likes of Hilton, Equity Office Properties and GE’s real estate assets. Gray was elevated as COO of Blackstone earlier this year, who joined the firm in 1992.

Jonathan Gray, Blackstone
Jonathan Gray, key architect of Blackstone’s real estate business

According to Nareit, industrial REITs have been performing well compared to office and retail domains. Industrial REITs returned 20.6% last year with 95% occupancy rate. The industrial real estate has been witnessing record low vacancy rates due to strong demand for space across the country. Experts feel that it’s the right time for consolidation within the domain since the industrial REIT space is highly fragmented.

Smaller REITs are currently potential targets for acquisition by biggies in the space and they are ready to be acquired because of healthy demand, premium valuations and optimistic sector outlook. As a result, it’s been raining deals in the US industrial real estate space. Last month, Prologis (PLD) gobbled up DCT Industrial Trust (DCT) for $8.4 billion and Welltower (WELL) spent $2 billion for buying Quality Care Properties (QCP). This month, apart from today’s Blackstone deal, Annaly Capital (NLY) announced its acquisition of MTGE Investment for $900 million.

With more potential targets still on the table, biggies like Blackstone, Duke Realty (DRE) and the likes might loosen their purse strings to augment their portfolio. This space is going to see a lot of action this year.

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