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The mall is now a warehouse, and Blackstone Group is betting $18.7 billion on the shift.
That’s how much the alternative investment manager is paying for 179 million square feet of urban logistics properties — the warehouses used by Amazon and other retailers to fulfill orders from online shoppers. The deal with Singapore’s GLP Pte, the second-largest owner of U.S. logistics real estate, will almost double Blackstone’s U.S. industrial footprint.
The rise of Amazon and other e-commerce companies has increased the need for warehouse space by retailers seeking to expand their digital operations and cut delivery times. The shift toward online shopping is reconfiguring supply chains and shaping the fortunes of industrial landlords, with demand especially high in and around large cities, where e-commerce has taken off fastest.
“This type of transaction may further validate what the public markets seem to have been saying for quite sometime: Well-placed industrial real estate assets continue to be sought after by institutional capital,” said J.T. Deignan, head of real estate equity capital markets at Mizuho Securities USA.
$BX to buy U.S. logistics assets from GLP for $18.7B. Largest ever private real estate transaction; nearly doubles $BX’s U.S. industrial footprint. MORE: https://t.co/408h64n4ra pic.twitter.com/97Lc9LZbum— Blackstone (@blackstone) June 3, 2019
The sale comes amid a flurry of warehouse deals. Blackstone, the world’s biggest alternative-asset manager, has made purchases and sales in the sector, including the $7.6 billion takeover of Gramercy Property Trust in October, and more than 100 warehouse assets from Harvard University’s endowment for $950 million.
The transaction “fits perfectly with the strength of the Blackstone Real Estate franchise: large-scale, high-conviction, thematic investing,” said Nadeem Meghji, senior managing director and head of real estate in the Americas for Blackstone Real Estate. “We continue to be the largest investor globally in the logistics sector.”
Blackstone isn’t alone in making big wagers on the continued growth of e-commerce. Berkshire Hathaway Inc. has been buying Amazon shares, with Warren Buffett’s company disclosing last month that its bet on the internet giant totaled $860.6 million at the end of March.
Warren Buffet (Houston Cofield/Bloomberg News)
The last mile is becoming key for driving revenue growth, according to Bloomberg. This means “starting with a focus on delivery and working backward, keeping the customer experience at the center,” Bloomberg analyst Jennifer Bartashus said.
“Making the shopper journey easy, with transparency into order and delivery status is critical to success,” she said. “Companies that build engaging experiences for their customers will be rewarded with loyalty and increased spending.”
Online shopping in the United States is climbing. Retail e-commerce sales for the first quarter totaled $137.7 billion, an increase of 3.6% from the last three months of 2018, U.S. Department of Commerce data released in May showed. Total retail sales, meanwhile, were estimated at $1.34 trillion, virtually unchanged.
“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,” Ken Caplan, global co-head of Blackstone Real Estate, said in a statement June 2.
The GLP portfolio includes about 1,300 properties, and counts Amazon and Whirlpool Corp. as its biggest tenants. Other tenants include FedEx Corp., Home Depot Inc., L’Oreal SA, UPS Inc., Starbucks Corp. and Tesla Inc., according to the company’s website.
Blackstone Real Estate’s global opportunistic BREP strategy will acquire 115 million square feet for $13.4 billion, while its income-oriented unlisted Blackstone Real Estate Income Trust will purchase 64 million square feet for $5.3 billion, according to the June 2 statement.