Blackstone catches a cold in Spain…

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Rent holidays:

Private equity fund
Blackstone, said to be the world’s biggest private landlord, is in
for some pain in Spain as the coronavirus effect falls out.

Along side other
private equity groups, including Bain Capital and Cerberus Capital
Management, they have poured tens of billions of their investor’s
cash into European property markets, including the UK and Spain.

Now it seems the
Spanish government in Madrid is singling them out, along with other
investment fund landlords, by slapping on them a decree which will
force on them into some heavy losses with their large private sector
residential property portfolios.

The funds’
investment in rapidly growing large-scale rental units seemed a no
brainer at the time, creating one of Europe’s hottest property
plays; now the move may seem not quite so smart.

Spain’s Deputy
Prime Minister, Pablo Iglesias, leader of the hard left Unidas
Podemos party, is said to have specifically singled out investment
funds, owners of rental units. They will be chief among those to take
either a 50% haircut on rent arrears, or to “cut a deal” with
vulnerable tenants so as to re-schedule rent payments over three
years.

As one of Spain’s
biggest landlords with some 15,000 multifamily rental units, any
plans Blackstone had of making up its losses through higher rents
elsewhere could come to an abrupt end. The Spanish government says
that tenants coming to the end of their contracts will automatically
be granted a six month extension, with no increase in rent, and with
no rent increase.

By contrast,
Blackstone’s European Logistics investment strategy appears to be
paying off in the coronavirus era, with home deliveries at a premium.
They have recently capitalised on the continued e‑commerce
tailwinds and strong logistics fundamentals in Europe by assembling a
large logistics portfolio along key strategic distribution corridors.

Their portfolio is
comprised of high-quality assets located in major logistics hubs in
countries such as Germany, France, the UK and Spain. This commercial
property portfolio, they claim, benefits from “robust tenant
demand” as continued e-commerce growth has driven an increased need
for well‑located warehouses across Europe.

In the UK Blackstone
recently bought-out listed industrial property company Hansteen
Holdings plc for an estimated £500m (€588m), to be added to its
recently launched European last-mile logistics company, Mileway.

James Seppala, head
of Blackstone Real Estate Europe, said:

“This (Hansteen)
transaction is a compelling opportunity to expand our pan-European
last-mile logistics real estate company Mileway in the UK, and it is
testament to our long-term belief in investing in the country.”

In 2019 Blackstone
acquired The Arch Company (formerly known as Network Rail Property),
a high-quality portfolio of primarily infill railway arches
concentrated in Central London and around key transport hubs.

The portfolio it
purchased is quite unique in character, comprised of over 5,200
rental units with diverse uses, including last mile logistics and
storage, retail, food and beverage, office and leisure.

The new company says
it is “committed to improving tenant experiences and providing
attractive spaces for local businesses to grow,” thus it intends to
contribute to long-term growth and revitalisation of local
communities.

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