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CIC buys Logicor for US$13.8 billion in largest ever European real estate deal
China Investment Corporation (CIC) has come out as the winner in the bidding process for Blackstone’s European logistics platform Logicor. The 12.25-billion-euro (US$13.8 billion) price tag makes it the largest ever deal in the European real estate sector.
Michael Marray 1 Jun 2017

China Investment Corporation (CIC) has come out as the winner in the bidding process for Blackstone’s European logistics platform Logicor.

CIC is China's sovereign wealth fund, while New York-based Blackstone is one of the largest private equity firms in the United States. The 12.25-billion-euro (US$13.8 billion) price tag for the Logicor platform is the largest ever deal in the European real estate sector.

Pictured: Logicor warehouse in Tamworth, UK. Courtesy logicor.eu

Logicor was founded by Blackstone’s real estate business in 2012, and built up rapidly via 50 acquisitions. It owns and operates a portfolio of 630 warehouse distribution centres in 17 countries, with 70% concentrated in the UK, Germany, France and Southern Europe. Located along primary transport corridors and in close proximity to large population centres, the portfolio is ideally positioned to benefit from the structural shift in demand driven by the rapid growth in e-commerce.

CIC is China’s biggest single buyer of global real estate. Like all Sovereign Wealth Funds, it has been struggling to generate yield with safe assets such as US Treasury Bonds, and has been making more portfolio allocations to alternative assets such as real estate and infrastructure.

CIC has a long-established relationship with Blackstone and its CEO and co-founder Stephen Schwarzman. Blackstone went public with an IPO in 2007, and CIC came in as a key investor ahead of the IPO with a US$3 billion investment. The stock price soon fell in the wake of the financial crisis, but in recent years Blackstone funds have attracted huge inflows from investors seeking exposure to alternative assets.

In January 2014, CIC purchased the Chiswick Park office complex in London from Blackstone for over £780 million (US$1.28 billion).

Blackstone’s real estate business was founded in 1991 and has approximately US$102 billion in investor capital under management. Blackstone’s real estate portfolio includes office, retail, industrial, hotel, and residential properties in the US, Europe, Asia and Latin America.

Beijing-headquartered CIC was founded in September 2007. As China's sovereign wealth fund, CIC serves as a vehicle to diversify China's foreign exchange holdings. As of the end of 2015, CIC's total assets were around US$800 billion.

The Logicor acquisition is expected to close later this year. Real estate investment banking firm Eastdil Secured and Goldman Sachs were lead advisors to Blackstone with additional advice provided by PJT Partners, Morgan Stanley, Bank of America Merrill Lynch and Citigroup. Simpson Thacher & Bartlett acted as legal advisors to Blackstone. UBS acted as financial advisor to CIC. Clifford Chance acted as legal advisors to CIC.

Amsterdam Hotel Deal
Meanwhile in another deal involving Blackstone, Chinese holding company Anbang Group is reported to be buying the DoubleTree hotel in Amsterdam for 350 million euros (US$392 million).

The DoubleTree by Hilton Amsterdam Central Station has 557 rooms, and was originally acquired in 2001 by Blackstone as part of a portfolio from Lloyds Banking Group, which was selling off assets at knockdown prices in the aftermath of the financial crisis.

Anbang was founded as an auto insurance company in 2004, and in recent years has emerged as one of China's biggest investors in overseas real estate. It has done a number of deals with Blackstone, including the 2014 acquisition of the Waldorf Astoria hotel in New York for US$1.95 billion; one of the city's most famous hotels, it is currently closed for renovation.

Blackstone also controls the Hilton Worldwide chain, and last year sold a 25% stake in the company to Hainan-based HNA Group.

China Life
In another logistics acquisition, insurance giant China Life is taking a 95% stake in a portfolio of US logistics and manufacturing centres, business parks, and healthcare facilities, valued at close to US$1 billion.

According a statement from ElmTree, China Life Insurance has agreed to provide financing to recapitalise a net lease portfolio held by a fund managed by ElmTree Funds, and form a joint venture with the private equity group.

The deal would value the joint venture at US$950 million, with China Life acquiring 95% and Elm Tree retaining 5% of the entity. China Life will refinance some of its debt via the issuance of commercial mortgage-backed securities.

ElmTree Funds will continue to serve as asset manager of the portfolio. ElmTree Funds was assisted in the transaction by boutique real estate advisory firm Hodes Weill Securities, which acted as the exclusive financial advisor to the private equity firm.

“This transaction gives China Life immediate scale and diversification in the US market,” commented Jim Koman, managing principal at ElmTree Funds. “We look forward to a highly productive, long-term relationship with China Life as we explore additional opportunities to invest together.”

Among the 48 properties in the portfolio are a 276,000 square foot refrigerated medical storage facility in Detroit, Michigan, and a 306,406 square foot manufacturing facility leased to General Electric in Lafayette, Indiana. ElmTree often develops the properties on a tailor-made basis with the tenant, and purchases them upon completion under long-term lease agreements.

In recent years, Chinese real estate investors have had a reputation for chasing trophy assets. But the weight of global money looking for acquisitions has pushed up prices, and Chinese buyers are now looking to diversify into secondary cities, warehouses, and budget hotel chains where better value is to be found.

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