Blackstone Deal Values European Warehouses at $24 Billion
February 17, 2022 | James Sprow | Blue Vault
• The U.S. investment firm says it is recapitalizing Mileway
• It is the largest owner of last-mile real estate in Europe
Blackstone Inc. is recapitalizing its European last-mile logistics company, in what will be the biggest private real estate deal in the region ever.
Existing investors in Mileway, a company that owns urban warehouses designed to cut delivery times of food and goods, have agreed to a deal that values the business at 21 billion euros ($24 billion), according to a statement Tuesday.
The deal allows the U.S. private equity company and those investors in its funds that want to hang on to their highly prized warehouse assets to keep them for the long-term, while allowing other early investors to cash out. Some large pension and sovereign wealth funds that were invested in funds owning Mileway have opted to increase the size of their commitments, according to James Seppala, head of real estate for Europe.
“Logistics is one of our highest conviction themes globally and the sector continues to prove its resiliency and strong growth potential,” Seppala said in the statement.
Blackstone built Mileway using capital from its so-called opportunistic real estate funds that seek outsize returns by targeting unloved sectors, repositioning properties or betting on development. Europe’s network of smaller urban warehouses were traditionally owned by thousands of smaller investors because the intensive work to source deals and manage the properties had been a barrier to most institutions.
The sector has boomed over the past decade as consumer spending shifted online and retailers competed for business by cutting delivery times. The high cost of land in and around urban centers means new warehouse developments are rare, pushing up the rents landlords can charge for existing space.
Blackstone concluded Mileway had achieved sufficient scale in each of its 10 markets last summer and has increased occupancy to more than 90%, Seppala said in an interview. That would have been a natural time for its opportunistic funds to sell, he added.
Instead, some existing investors wanted to maintain their exposure. The firm gave clients the option to cash out, stay in, or increase their stakes.
Blackstone’s so-called perpetual capital vehicles including Blackstone Property Partners Europe will buy a stake of about 30% in Mileway, with the remainder owned by those clients that have voted to stay in or increase their stakes. The business remains subject to a “go-shop” process where other bidders will have 75 days to come forward with rival bids, a tool designed to ensure investors get the best price.
The recapitalization of Mileway echoes a similar deal undertaken by Blackstone for its U.S. life sciences property business BioMed Realty which was transferred from one Blackstone fund to a new perpetual vehicle for $14.6 billion in 2020.
Mileway is the largest owner of last-mile logistics real estate assets in Europe, with 1,700 properties spanning 14.7 million square meters across 10 countries including the U.K., Germany, the Netherlands and France.
Source: Bloomberg, by Jack Sidders, February 15, 2022
