Blackstone swoops on listed UK commercial property company

Blackstone has struck a £700mn deal to buy a British commercial property company, as the US private equity group shops for bargains in the UK real estate sector.

Blackstone has offered to pay shareholders in Industrials Reit a 42 per cent premium to Friday’s closing price to take the company private. The company’s board said it would recommend Blackstone’s offer for the portfolio, which includes 7mn sq ft of UK industrial and warehouse space.

The deal comes at a time when shares in listed real estate companies have slumped as rising interest rates depress real estate values, creating opportunities for private funds to snap up portfolios.

Industrials Reit said it was “working closely” with Blackstone “to complete as soon as is practicable”. 

The offer price of 168p per share is equivalent to the company’s share price last September before a sell-off in the autumn. UK real estate investment trusts tracked by Numis are trading at an average discount of 24 per cent to net asset value.

Discounts make it difficult for companies to issue equity, while access to debt has dried up in the face of market uncertainty.

“The equity capital markets have shut whilst the sector struggles with the new interest rate backdrop,” said Miranda Cockburn, an analyst at Panmure Gordon. She said it was “a pity” that Industrials Reit was leaving the listed sector but that the offer appeared “fair”.

The company said it planned to finalise the offer with Blackstone in the coming weeks. The deal, which includes about £200mn in debt, will be subject to shareholder approval. The company was advised by Eastdil Secured while Rothschild advised Blackstone.

Industrials Reit, founded by South African businessman Paul Arenson, is jointly listed in Johannesburg but since 2018 has focused on “multi-let industrial” property across the UK, mostly small units and warehouses close to city centres where logistics space is scarce.

Blackstone has invested heavily in what is known as “last-mile” warehouse space, which is much more in demand because of online shopping. Logistics property makes up 50 per cent of Blackstone’s €100bn European real estate portfolio, including $30bn invested in the UK.

Blackstone took UK-listed St Modwen private for £1.2bn in 2021, securing the company’s substantial logistics development and management business and land portfolio. The take-private of one of the UK’s dwindling number of listed real estate vehicles was controversial at the time, with UK fund managers pushing for a higher price.