Blackstone and GIC have struck a new sort of partnership. The Singaporean wealth fund typically invests in the private equity firm's funds and alongside them in acquisitions. Their latest deal suggests GIC also is keen to buy from Blackstone.
The firm led by Steve Schwarzman is selling US industrial property rollup IndCor to GIC affiliates for $8.1 billion, less than a year after the two shook hands on a big London office deal. Though it's tempting to think one side is getting the better of the other, divergent investment goals could mean both sides prosper.
Blackstone created IndCor after the financial crisis, cobbling together over a dozen acquisitions since 2010 to create a portfolio of US warehouses and distribution centres. Low interest rates, a rebounding economy and the time horizon of its funds prompted Blackstone to seek an initial public offering for the real estate investment trust. Instead, GIC is taking the whole company off its hands at once.
The two have sat opposite each other at the negotiating table before. Last December, GIC agreed to buy Blackstone's 50 per cent stake in the Broadgate complex in the City of London, another opportunistic post-crisis investment, for about $2.8 billion.
The transfer of close to $11 billion of real estate implies fundamentally different views of the business cycle. Liquidity and investment timetables also play a part, however. Investors in Blackstone's funds expect to get their cash back - with a healthy return, like the $2-billion profit generated by IndCor - in under a decade. GIC, which manages the Singapore government's reserves, takes a longer view.
It's hard to tell how much risk GIC is absorbing in the latest transaction. Based on Blackstone's standard investment strategy, it's safe to assume IndCor already carries a hefty amount of debt. GIC may yet bring in partners, however.
There's no mistaking the Singapore fund's appetite for real estate. At the end of March, it accounted for seven per cent of its portfolio, below a target of nine to 13 per cent. That suggests the next time Blackstone looks for an exit from its $80 billion of property assets, it may go through GIC's door.
The firm led by Steve Schwarzman is selling US industrial property rollup IndCor to GIC affiliates for $8.1 billion, less than a year after the two shook hands on a big London office deal. Though it's tempting to think one side is getting the better of the other, divergent investment goals could mean both sides prosper.
Blackstone created IndCor after the financial crisis, cobbling together over a dozen acquisitions since 2010 to create a portfolio of US warehouses and distribution centres. Low interest rates, a rebounding economy and the time horizon of its funds prompted Blackstone to seek an initial public offering for the real estate investment trust. Instead, GIC is taking the whole company off its hands at once.
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The transfer of close to $11 billion of real estate implies fundamentally different views of the business cycle. Liquidity and investment timetables also play a part, however. Investors in Blackstone's funds expect to get their cash back - with a healthy return, like the $2-billion profit generated by IndCor - in under a decade. GIC, which manages the Singapore government's reserves, takes a longer view.
It's hard to tell how much risk GIC is absorbing in the latest transaction. Based on Blackstone's standard investment strategy, it's safe to assume IndCor already carries a hefty amount of debt. GIC may yet bring in partners, however.
There's no mistaking the Singapore fund's appetite for real estate. At the end of March, it accounted for seven per cent of its portfolio, below a target of nine to 13 per cent. That suggests the next time Blackstone looks for an exit from its $80 billion of property assets, it may go through GIC's door.