US-based investor Blackstone Group has outbid competitors GIC and Ontario Municipal Employees Retirement System to secure a 90% stake in the warehousing platform of ESR, an Asia-focused logistics company, in partnership with German investor Allianz. Sources report that Blackstone's bid stands at Rs 2,000 crore. Allianz is selling its 50% stake, while ESR will sell 40% and retain a 10% holding. The platform, established in 2018, comprises eight assets spanning 10.5 million square feet. Blackstone aims to expand its warehousing portfolio from 40 million square feet to 100 million square feet in the next few years.
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In a significant development, Blackstone Group, a prominent US-based investor, has emerged as the top bidder for a 90 percent stake in the warehousing platform jointly owned by Asia-focused logistics company ESR and German investor Allianz. Reliable sources have revealed that Blackstone has offered a staggering sum of Rs 2,000 crore for the stake.
This move positions Blackstone ahead of other notable contenders such as GIC and Ontario Municipal Employees Retirement System, solidifying its status as the finalist to acquire the stake, as per insider sources. While Allianz plans to divest its entire 50 percent stake, ESR will sell 40 percent, with the intention of retaining a 10 percent holding in the platform.
Sources familiar with the matter have indicated that ESR and Allianz have finalized their decision to select Blackstone as the preferred buyer. The official signing of the deal is expected to take place in the near future. The total value of the assets involved in the transaction amounts to an estimated $450-475 million, according to the same sources.
The warehousing platform, established in late 2018, currently encompasses eight assets with a combined area of 10.5 million square feet. ESR and Allianz had initially committed to investing $1 billion in the joint venture, maintaining an equal 50:50 partnership. The platform facilitated the bidding process through the involvement of Anarock Capital.
Additional information reveals that Blackstone has ambitious plans to expand its warehousing portfolio significantly. The company aims to increase its current capacity from 40 million square feet to a substantial 100 million square feet within the next three to five years, as recent media reports have suggested.
Blackstone had established a warehousing platform called Horizon Industrial Parks (Horizon) in 2022, led by Rahul Pandit. In 2021, funds managed by Blackstone successfully acquired Embassy Industrial Parks from Warburg Pincus and Embassy Group, amounting to an enterprise value of $700 million. Additionally, the company has a joint venture in place with the Hiranandani Group to manage warehousing assets in the country.
Since its inception, Horizon has expanded its existing portfolio by 3.7 million square feet and developed an additional 5 million square feet, with a capital outlay of Rs 4,500 crore.
Impressively, Blackstone's global warehousing portfolio currently spans an extensive 1.2 billion square feet, representing 37 percent of its total real estate portfolio. Capitalization rates, a key metric used by investors to evaluate real estate investments in warehousing properties, have declined from 8-8.5 percent in previous years to 7 percent at present, indicating heightened investor interest in this sector.
Industry consultants have observed that more institutional investors are wagering on the growth potential of the warehousing sector, which currently suffers from limited availability of Grade A stock. These investors are willing to accept lower yields in exchange for future growth, with experts noting that the warehousing sector is outpacing the growth of office properties and accounts for half of India's total office stock.
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