Blackstone plans to merge two private warehouse companies to create one of Britain’s biggest owners of industrial property. The move could pave the way for a possible sale of the company or an initial public offering.
The private equity firm will integrate the management of St Modwen and Industrials REIT along with assets acquired through 25 other deals to create Indurent, an internal document sent to employees showed.
The company will own over 200 properties with a total area of 2.4 million sqm, a spokesperson confirmed. This will make it one of the largest owners of logistics property in the UK after Segro Plc, which has a UK property portfolio totaling almost 2.8 million sqm, and Tritax Big Box REIT.
Creating a large integrated platform for the private equity firm’s UK warehouse investments helps position the business for a future sale. The reason is that large sovereign wealth funds and pension funds seeking to increase their exposure to warehouse investments also need management teams to operate them. Another option could be an initial public offering (IPO).
The move follows Blackstone’s previous ventures into warehouse properties in the UK and Europe. They started with Logicor, which the company founded, expanded and sold to a sovereign wealth fund in China. It repeated the same approach with Mileway, the owner of the so-called “last mile” urban warehouses, which it recapitalized in Europe’s largest real estate deal in history.
Blackstone has been putting funds into UK warehouses, investing 2.1 billion GBP (2.6 billion USD) in construction projects of St Modwen and Industrials REIT after acquiring them. The company believes the transformation of global supply chains will boost warehouse rental growth, which has accelerated in recent years.
“UK logistics property is a strong belief for Blackstone given the extremely strong performance of our portfolio and the favorable long-term fundamentals in the sector”, commented the company’s head of property in Europe, James Seppala. “As a pure British logistics company with an outstanding team, Indurent will enable us to continue to capitalize on good opportunities in the sector and create value for our investors”, he pointed out.
Publicly traded British logistics real estate companies have weathered a series of shocks that have dogged REIT investors, sending share prices lower even as asset values performed better than expected. This led to a wave of consolidation in the sector and companies such as Blackstone took a number of property owners private. At the same time, owners responded by embarking on a series of mergers to cut costs and increase scale.
Tritax, whose shares now trade at a discount of about 13% to the value of its assets, said on Monday it planned to acquire smaller rival UK Commercial REIT.
