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Why Blackstone and other private equity giants are gobbling up warehouses

Industrial real estate gives investors another way to cash in on the ecommerce boom.

Industrial real estate gives investors another way to cash in on the ecommerce boom. (Scott Olsen/Getty Images)

Private equity gets lots of attention for gobbling up assets of all types, from fast-food chains to red-hot tech companies.

Less fanfare perhaps has followed the industry’s growing hunger for, of all things, warehouses and other industrial real estate.

With ecommerce sales booming, private equity firms have been on something of a buying binge, snatching up tens of millions of square feet of warehouse space, in part as an additional way to capitalize on an ongoing revolution in digital commerce and logistics.

At the center of the push is Blackstone, a private equity titan that has broadened its investment strategies well beyond the leveraged buyouts that have been the firm’s calling card.

In the firm’s latest warehousing conquest, Blackstone unveiled its purchase last week of 13 industrial warehouses from Iron Mountain, a Boston-based provider of storage services, for $358 million. Spanning 2.1 million square feet, the portfolio includes properties in California, New Jersey and Pennsylvania’s Lehigh Valley, a once-booming steel region that has pushed hard into the logistics boom. Iron Mountain will continue to use the facilities and enter a 10-year lease that includes an option to extend another 20 years.

KKR is also making waves in industrial real estate. The firm is close to making a deal worth more than $800 million to acquire a portfolio of warehouses in Atlanta, Baltimore, Chicago and Dallas. KKR would finance the transaction with $700 million in debt, according to Bloomberg, which first reported the deal talks.

Led by Blackstone Real Estate Income Trust, the Iron Mountain deal is one of the larger examples of a sale-leaseback that provides private equity firms a steady revenue stream through rent payments—all while the property appreciates in value. And it pushes Blackstone deeper into the industrial real estate market, which could by 2025 require another 1 billion square feet, in part as companies race to fulfill online orders during the pandemic, according to JLL, a real estate services company.

“This is not just COVID. Industrial real estate has been the best performing core real estate type in the last decade, driven particularly by shifting consumer behavior toward the convenience of ecommerce,” said Zane Carmean, a PitchBook analyst. “Non-digital retail was already in a recession before 2020, then COVID accelerated those trends. Blackstone identified the secular shift long ago.”

David Levine, a Blackstone senior managing director, said in a statement that the firm’s holdings are “heavily weighted” toward logistics, and said ecommerce is contributing to a bull market in industrial real estate.

Blackstone has become a major investor in warehouses over the past decade, with the firm’s real estate arm growing to nearly $170 billion in assets under management as of Sept. 30. Since 2010, Blackstone has acquired more than 1 billion square feet of property in over 200 transactions around the globe.

Its largest came in June 2019, when the firm acquired a portfolio of logistics assets from Singapore’s GLP spanning 179 million square feet for $18.7 billion—a move that pushed Blackstone into business with Amazon, GLP’s largest tenant. A few months later, Blackstone agreed to purchase Colony Industrial, a real estate investment trust that invests in warehouses, from Thomas Barrack’s Colony Capital for around $5.9 billion. In March, Blackstone acquired a portfolio of 22 warehouses in the UK from Clearbell Capital for £120 million ($161 million).

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    Written by Adam Lewis
    Adam Lewis was a financial writer covering private equity for PitchBook. He covered dealmaking, company and investor news for the PitchBook newsletter and blogs about the intersection of private equity and politics. A graduate of the WSU’s Edward R. Murrow College of Communication, Adam was previously a sportswriter covering the Mariners and Seahawks.
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