Blackstone deal values ​​European warehouses at $24 billion

Blackstone is recapitalizing its European last-mile logistics company, in what will be the largest private real estate transaction ever in the region.

Existing investors in Mileway, a company that owns urban warehouses designed to reduce delivery times for food and goods, have agreed to a deal that values ​​the company at 21 billion euros ($24 billion), according to a statement released on Tuesday.

The deal allows the US private equity firm and investors in its funds who want to keep their highly prized warehouse assets to hold them for the long term, while allowing other early investors to withdraw their money. Some large pension funds and sovereign wealth funds that were invested in proprietary Mileway funds chose to increase the size of their commitments, according to James Seppala, head of real estate for Europe.

“Logistics is one of our strongest themes globally and the sector continues to prove its resilience and strong growth potential,” Seppala said in the statement.

Blackstone built Mileway using capital from its so-called opportunistic property funds that seek outsized returns by targeting unloved sectors, repositioning properties or betting on development. Europe’s network of small urban warehouses has traditionally been owned by thousands of small investors, as the intensive work of finding contracts and managing properties was an obstacle for most institutions.

The sector has exploded over the past decade as consumer spending moved online and retailers competed for business by cutting delivery times. The high cost of land in and around urban centers means that new warehouse developments are rare, driving up the rents that landlords can charge for existing space.

Blackstone concluded that Mileway achieved sufficient scale in each of its 10 markets last summer and increased occupancy to more than 90%, Mr. Seppala said in an interview. It would have been a natural time to sell his opportunistic funds, he added.

Instead, some existing investors wanted to maintain their exposure. The company gave customers the option to cash out, stay, or raise their stakes.

Blackstone’s so-called perpetual capital vehicles, including Blackstone Property Partners Europe, will buy an approximate 30% stake in Mileway, with the remainder held by clients who voted to stay or increase their stakes. The company remains under a “go-shop” process where other bidders will have 75 days to submit competing bids, a tool designed to ensure investors get the best price.

Mileway’s recapitalization echoes a similar deal struck by Blackstone for its U.S. life sciences real estate business BioMed Realty, which was transferred from a Blackstone fund to a new perpetual vehicle for $14.6 billion. in 2020.

Mileway is the largest owner of last mile logistics real estate assets in Europe, with 1,700 properties covering 14.7 million square meters in 10 countries including the UK, Germany, the Netherlands and France .