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.