In a strange turnabout, Blackstone Group LP (BX) is buying back part of a business it recently sold.
In June, Blackstone, the world's largest private equity manager, sold the warehouse operator Logicor to the China Investment Corp., or CIC, for €12.25 billion ($14.4 billion).
Now Blackstone's newly raised €2 billion European fund is buying back 10% of Logicor, which runs warehouses in Europe. It makes sense since that's a new fund with a new investment agenda, time horizon and money to put to work.
But the deal says more about the potentially friendly nature of an allegiance with the Chinese government's money men than any strategic uncertainty.
This deal also makes sense because it shows how chummy Blackstone is with the Chinese government. The CIC, China's sovereign wealth fund, invited Blackstone back into Logicor, according to the Financial Times, alongside several other investors.
Several insurers are also reportedly considering climbing on board. CIC now has 150 million square feet of warehouse space in Europe, at a vacancy rate of just 7%.
The CIC already sold 10% of its warehouse portfolio in Europe, including Logicor, to a subsidiary of the Chinese insurance giant China Reinsurance Group, or China Re HK:1508. That deal was struck for €579 million ($680 million) in cash, so presumably the Blackstone fund has come to a similar valuation, although the price of the new investment has not been disclosed.
The CIC has also hired Blackstone to manage Logicor's portfolio, the FT says, citing sources briefed on the transaction. Reuters confirmed the sale of the 10% stake, although Blackstone has declined to officially comment.
Blackstone has a recent history working alongside not just the CIC but also other major Chinese conglomerates that have been active overseas such as Anbang Insurance and HNA - although both of those private groups are rethinking their international strategies, faced with greater scrutiny from the Chinese government over their purchases and in particular sources of funding.
Blackstone has a real estate portfolio of around $200 billion. It carved Logicor out of its holdings in 2012 to manage and operate its logistics operations and warehouses in Europe.
Blackstone's real estate team is also pally with Singapore Inc. In December 2014, it sold the logistics company IndCor Properties for $8.1 billion to Singapore's sovereign wealth fund, known simply as GIC, and Global Logistics Properties (GBTZY) , a warehouse operator backed by the Singapore government.
Logistics investments make sense because real estate assets the world over have reached inflated levels thanks to the easy central bank money sloshing around the system. That has brought yields to very low levels for many real estate sectors, and made the "core" buildings that major institutional investors value as central parts of their portfolios virtually impossible to come by at a reasonable price. Warehouse space, benefitting from the boom in e-commerce, churns out predictable cold cash at a regular rate.
Here in Hong Kong, where there is no capital gains tax on property and no restrictions on moving money in and out of the city, our real estate prices have reached record levels and appear set to build on that. That makes developer stocks here an attractive proposition.
In Hong Kong, warehouse space looks set to build on this year's 10% gain with another advance of 0 to 5%, according to the commercial real estate brokerage Savills. "Flatted factories" - multi-storey industrial buildings with cargo lifts - have risen 8% in 2017 and will also likely add another 5% or so gain in value in 2018.
