Blackstone tips offshore spending spree to continue
The world’s largest real estate investor, Blackstone, expects the surge of offshore investment to continue with Australia’s already driven-down yields to tighten further as capital chases major office towers, shopping malls and logistics assets.
A combination of investors moving out of fixed income and a search for an alternative investment destinations in the wake of Brexit will underpin inflows into Australian commercial property, says Blackstone’s senior managing director, real estate, Alan Miyasaki.
“Australia has three sought-after things … good rule of law, transparency and you have growth. Those three things are not everywhere,” Miyazaki says.
He tips more money will enter the sector globally, particularly in the mainstream of property where Blackstone has made its mark locally.
Places like Sydney or Melbourne are much better spots — that’s why you’re seeing so much capital come here
“A lot of the money that was in fixed income has gone to real estate and when it goes to real estate it goes to core real estate first,” he says.
Miyasaki argues that Brexit will have a number of effects. At a global level, it is another spur for interest rates to stay lower for longer, and uncertainty has put London on a temporary “time out” for major investors.
“There is more money in core and there is less places for it to go,” Miyasaki says, nominating Sydney, Melbourne, Tokyo and Singapore as beneficiaries.
With Asian capitals so tightly held, “it means places like Sydney or Melbourne are much better spots — that’s why you’re seeing so much capital come here”.
He argues that Singaporean and Chinese capital will seek Australian assets. “(With) the insurance company money in China there is a lot of appetite for offshore assets,” he says.
The New York-based investment house has amassed a $6 billion portfolio in Australia since debuting locally with the post-global financial crisis purchase of troubled listed property company Valad.
Australia has three sought-after things … good rule of law, transparency and you have growth. Those three things are not everywhere
Last year it spent $675 million on a half share in the Southern Cross office complex in Melbourne followed by $400 million on the Rundle Mall retail centre and 80 Grenfell St office complex in Adelaide.
The group has operated in a “sweet spot” of deals between $500 million-$1 billion and has drawn on its global reach to win assets and brought in expertise to fix them before exiting.
Blackstone’s global logistics empire gave it an edge in securing a $640 million logistics portfolio from Goodman Group and its international retailing knowledge is helping it rework its retail centres.
The group’s successful $341 million purchase of Top Ryde in Sydney has given it confidence to push deeply into the local sector.
The centres it has subsequently bought are being subtly repositioned towards their local areas, to capture the shift towards entertainment.
The retail operation has generated much value, prompting reports that Blackstone may weigh up a real estate investment trust, joint ventures or a trade sale, but a course is yet to be determined, with the focus firmly on fixing the assets before an exit strategy is considered.
Blackstone managing director Chris Tynan, who oversees the Australian real estate business, is circumspect about individual opportunities but notes that the firm’s practice of making non-hostile approaches extended to the local market.
He indicates the firm had a desire to grow its non-core office fund and was seeking opportunities.
Blackstone has been a contender for platform purchases including the $9 billion Investa business and the Masters business, Woolworths’ disastrous foray into hardware stores.
– with Turi Condon
This article originally appeared on www.theaustralian.com.au/property.