GIC said to be in US$8b deal to buy Blackstone's property unit

New York

GIC Pte Ltd's planned purchase of Blackstone Group LP's US industrial property company signals the Singapore investment agency's appetite for real estate even as investments by other state funds wane (See what GIC has been buying).

The Singapore fund, which manages more than US$100 billion, is leading a group to buy Blackstone's IndCor Properties Inc (See IndCor's portfolio companies) for more than US$8 billion, two people with knowledge of the matter said.

The GIC partnership is seeking US$5 billion in debt to finance the acquisition, said one of the people, who asked not to be identified because the negotiations are private. The two sides have reached an agreement in principle that could still fall apart, another person said.

Peter Rose, a spokesman for New York-based Blackstone, and Jennifer Lewis, a spokeswoman for GIC, declined to comment.

IndCor had planned to raise about US$1 billion through an initial public offering, which would have valued the company at about US$8 billion, a person with knowledge of the plans said in August. A private sale would give Blackstone an assured profit on a major asset at a time when stocks have been volatile.

IndCor, based in Chicago, said on Sept 8 that it confidentially filed with the Securities and Exchange Commission for an IPO as a real estate investment trust. IndCor could still go public should Blackstone and the GIC group fail to reach a definitive agreement, said one of the people with knowledge of the plans.

Blackstone, the world's biggest private-equity firm, started accumulating property in 2010 to build the industrial landlord. IndCor has about 11 million sq m of warehouses throughout the US

GIC has been on a worldwide shopping spree for real estate, which accounted for 7 per cent of its assets in the fiscal year ended March 31. Last month, the wealth fund bought a building next to Tokyo Station for US$1.7 billion and on Monday, it announced plans to co-invest in Auckland's Viaduct Quarter.

Last fiscal year, GIC acquired Blackstone's 50 per cent stake in London's Broadgate office complex for more than US$2.7 billion and teamed with New York-based developer Related Cos and the Abu Dhabi Investment Authority to buy Time Warner Inc's headquarters in Manhattan for US$1.3 billion.

The Singapore state fund is the world's sixth biggest, with estimated assets under management of US$315 billion, according to the website of London-based Institutional Investor's Sovereign Wealth Center.

GIC has been expanding beyond prime office towers in major cities. In September, a GIC affiliate and two Canadian pension funds invested US$700 million in XPO Logistics Inc, a provider of services including airfreight forwarding and warehousing management that's based in Greenwich, Connecticut.

GIC's purchases come at a time when sovereign wealth funds are cutting back on real estate investments with more competition from insurers and pension funds. Direct property investments declined 43 per cent to US$5.9 billion in the first half from the previous year, the London-based Institutional Investor's Sovereign Wealth Center said in a report yesterday.

In addition to GIC, Norway's state fund, the world's biggest, is also expected to pursue more property deals. The fund formed a new real estate group in July and is seeking to invest almost US$10 billion annually over the next three years. Property made up 1.3 per cent of the fund's US$813 billion holdings in the third quarter, compared with 0.9 per cent a year earlier, according to its quarterly reports.

Warehouse properties and logistics-services companies have attracted investment as global trade increases. Brookfield Property Partners LP and TPG Capital also have been acquiring such assets in the past two years.

IndCor would have been the fifth real estate IPO of a Blackstone-owned company since October 2013, when Brixmor Property Group Inc, the second-largest US shopping centre landlord, went public. Brixmor was followed by last November's IPO of Extended Stay America Inc, a lodging company part-owned by Blackstone. In December, Blackstone completed the largest-ever hotel IPO with Hilton Worldwide Holdings Inc, then took lodging operator La Quinta Holdings Inc public in April.

Blackstone has been reducing its stakes in Brixmor, Hilton and Extended Stay through stock sales this year. On Monday, it sold 90 million Hilton shares at US$25 each, or a total of US$2.25 billion.

The sale reduced the firm's stake to about 57 per cent from about 66 per cent, excluding the exercise of options, according to a regulatory filing. Hilton closed at US$25.25, up 26 per cent from its IPO price.

Blackstone is stepping up real estate sales as it prepares to raise its next global property fund. The firm has said it plans to raise at least as much as its last fund, the US$13.3 billion pool completed in 2012.

A private sale of IndCor would allow Blackstone to realize a profit sooner than an IPO. The firm similarly has been selling some assets from another major investment, Equity Office, purchased in 2007. IndCor would have been the largest US REIT with purely industrial properties.

"Blackstone is agnostic in terms of how they execute their exit strategy," Eric Frankel, an analyst at Green Street Advisors Inc, said in a telephone interview in September. "Some platforms get a better valuation going public and some are better off selling to third parties." BLOOMBERG