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Blackstone move to acquire Industrials REIT could be boost for sector


Fund management giant Blackstone has moved to buy Industrials REIT, a listed property fund, for £700m. This was at as premium of 42% and is being hailed as a much needed shot in the arm for UK commercial property investment. The board of Industrials REIT said it would be recommending the offer to shareholders. 

The offer was made at 168p which is well above where the REIT has been trading recently. Ahead of the offer the REIT was at 117p. The trust will now be leaving the listed sector. It was revealed that the transaction will involved approximately £200m in debt.

Matthew Norris, investment adviser at real estate specialist Gravis, adviser to the VT Gravis UK Listed Property fund (GULP) said: “The bear case for the listed real estate sector appears to be receding and a bull case is emerging as evidenced by the recent spate of companies being picked up by either private equity investors or sovereign wealth funds.”

The announced bid for Industrials REIT follows bids for Vantage Towers in Germany and Summit Industrial Income REIT in Canada.

“The most recent move by private equity further demonstrates the attraction of really good rental growth evident in the key megatrend sectors of digitalisation, urban logistics and generation rent,” said Norris.

The Industrials REIT was originally founded by a South African businessman and is also listed in South Africa. Its recent focus has been on assets in the multi-let UK property sector, for example small units and warehouses in areas where there is a shortage of such space (e.g. in city centres).

Fund managers are focusing on the growth spots in property

It should be noted that there is still a premium attached by professional property investors to ‘last mile’ assets, namely warehouse space which forms an important component of the distribution chains involved in online shopping. This trend emerged during the pandemic lockdowns, but has continued since then. Big property fund managers have been trying to ‘rifle shoot’ these bright spots within a commercial property sector which is struggling at the moment.

UK commercial property has been experiencing doldrums recently on the back of the pandemic which saw millions of workers embrace hybrid working practices, and Brexit. The FTSE 350 REITs index has plunged since Brexit to currently trade at 2208 points. It has shed over 35% in the last year. UK REITS tracked by Numis are currently trading at an average discount of 24% to their NAVs.

The offer from Blackstone is expected to be finalised shortly.

“The ‘buy’ incentive really starts with valuations, and currently potentially attractive as discount gaps exist,” said Norris at Gravis. “Clearly picking the right sub-sectors and the best stocks is key to generating superior returns and in certain areas, high-quality real estate is trading at a wide discount to reported net asset values.”

Industrials Reit forms 2.5% of the Gravis GULP portfolio.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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