While reports circulated last week that Blackstone Group was planning to sell-off its massive office portfolio acquired at the depths of the recession, the private equity investor showed it's still "long" on real estate, striking a deal to acquire 15 neighborhood shopping centers in seven states from Regency Centers Corp. (NYSE: REG
) for $321 million.
The deal is the latest transaction in a buying spree for retail and industrial properties that's lasted more than a year, starting with its acquisition of the 588-property shopping center portfolio from Centro Properties Group for $9.4 billion. Stephen A. Schwarzman, Blackstone co-founder, chairman and CEO, noted in a call to investors last week that the company has deployed or committed $16 billion to real estate since the fourth quarter of 2009.
"We're currently operating in a unique moment in time given our size and the very favorable investing climate," said Schwarzman. "As the largest player in opportunistic real estate in the world and one of the sole survivors from the financial crisis, we have the dominant franchise in this space."
Blackstone Real Estate Partners VII acquired the Regency portfolio in a transaction scheduled for closing this week. The shopping centers sold by Jacksonville, FL-based Regency are in California, Florida, Illinois, North Carolina, Ohio, Tennessee and Texas. The 2.1 million-square-foot portfolio is more than 90% leased to retail chains such as Lowe's, Home Depot, Publix, Kroger and Walgreens.
Regency Centers will keep a preferred equity investment of about $47.5 million in the deal, which includes no debt, and plans to use proceeds from the sale to invest in "dominant, grocery-anchored shopping centers located in target markets with excellent prospects for growth," according to a statement by Regency.
Six of the centers are in Florida, including Port St. Lucie, Sarasota, Fort Myers and three properties in Stuart; and properties in Modesto, Fresno and Riverside, CA.
The deal includes two Dallas centers and one each in Raleigh, NC; Akron, OH; Nashville and Chicago.
"The sale of these non-strategic assets is consistent with the stated objective for our capital recycling program this year, which is to be a net seller and to reinvest the proceeds into dominant, grocery-anchored shopping centers located in target markets with excellent prospects for growth and to reduce leverage," said Hap Stein, Regency chairman/CEO.
Blackstone has been particularly active in retail of late through its Blackstone Real Estate Partners VII fund, which closed on a $1.4 billion, 46-property joint venture with DDR Corp. last month, purchasing the assets from EPN Group. The fund bought a retail portfolio from Equity One Inc. late last year for $473.1 million.
Schwarzman said the latest Blackstone real estate fund has raised over $12 billion. He's "extremely confident" the fund will hit its $13.3 billion cap at the final close in the next few months.
"This gives us by far the largest pool of dry powder capital in the industry at a time when we are seeing highly attractive investment opportunities due to the level of distress and the need to deleverage around the globe."
In virtually all recent transactions, he said, Blackstone has faced limited bidding competition due to the magnitude of capital required and the complexity of the transactions.
"Our strategy remains focused on buy it, fix it, sell it, in which we acquired good assets that need improvement at the low replacement cost and provide capital and expertise," he said.
The graphic below details the properties acquired from Regency: