Blackstone to acquire Excel Trust for $2bn

June 2015 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Global investment and advisory firm Blackstone Property Partners L.P. has entered into an agreement to acquire the real estate investment trust Excel Trust, Inc. in a transaction valued in the region of $2bn.

The definitive agreement will see Blackstone acquire all outstanding shares of common stock of Excel Trust for $15.85 per share in an all-cash transaction. Blackstone will be making this investment through Blackstone Property Partners (BPP), its Core+ real estate investment unit. BPP targets substantially stabilised office, retail, industrial and multifamily assets located in primary US markets.

Blackstone’s real estate business was founded in 1991 and has approximately $81bn in investor capital under management. Blackstone’s real estate portfolio includes hotel, office, retail, industrial and residential properties in the US, Europe, Asia and Latin America. Major holdings include Hilton Worldwide, Invitation Homes (single family homes), Logicor (pan-European logistics), SCP (Chinese shopping malls), and prime office buildings in the world’s major cities.

Blackstone real estate also operates one of the leading real estate finance platforms, including management of the publicly traded Blackstone Mortgage Trust. A global leader in real estate investing, real estate accounted for 43 percent of Blackstone’s economic net income in 2014 (this figure includes American Realty Capital Properties’ sale of its multi-tenant shopping centre portfolio for $1.93bn to the Blackstone/DDR Corporation joint venture).

Excel Trust, Blackstone’s acquisition, is a San Diego-based real estate investment trust (REIT) which primarily targets community shopping centres, power shopping centres and grocery anchored neighbourhood centres. Founded in 1978, Excel Trust has overseen several billion in retail related acquisitions and developments. Although its revenue rose 16 percent to $130m in 2014, the company reported a net loss of $3.3m compared to a gain of $8.5m in 2013.

“Excel is a terrific company with great long-term potential”, said Nadeem Meghji, co-head of US real estate acquisitions for Blackstone. “This will be a milestone transaction for our Core+ real estate investment strategy.”

Blackstone’s recent activity in the market has led to real estate overtaking private equity as its most high-profile and lucrative business. Furthermore, Blackstone can claim to have the world’s biggest private real estate investment business.

“We believe this is an excellent outcome for our stockholders,” said Gary Sabin, chairman and CEO of Excel Trust. “Appetite for high-quality retail real estate is strong with cap rates and REIT stock multiples approaching historic levels and we did not believe the market accurately reflected the value of the assets. This led the Board to conclude it was time to more fully assess the value of our portfolio. After reviewing our options, we were pleased to have a group with Blackstone’s reputation step forward with this offer.”

The transaction, unanimously approved by Excel Trust’s board of directors, represents a premium of nearly 15 percent over the company’s closing stock price on 9 April 2015. In addition to the common stock dividend of $0.18 per share payable on 15 April 2015, Excel Trust intends to pay an additional common stock dividend in July 2015, but, under the terms of the agreement, not for any quarter thereafter.

Eastdil Secured/Wells Fargo Securities LLC acted as Blackstone’s lead financial adviser with Barclays also acting in a financial adviser capacity in connection with the transaction. Simpson Thacher & Bartlett LLP acted as legal adviser to Blackstone. For Excel Trust, Morgan Stanley & Co. LLC acted as financial adviser and Latham & Watkins LLP acted as legal adviser.

The Blackstone/Excel Trust transaction is expected to complete in the second half of 2015, dependent upon customary closing conditions including the approval of Excel Trust’s stockholders. The transaction is not contingent on receipt of financing by Blackstone.

Fraser Tennant