Quality space: People carry shopping bags as they exit a shopping mall in New York City. Blackstone is likely to prevail in the auction for ROIC that has also attracted interest from other private equity firms, including Bain Capital. — AFP
NEW YORK: Blackstone is in advanced talks to acquire Retail Opportunity Investments Corp (ROIC), which owns US shopping centres and has a market value of US$3.4bil including debt, according to people familiar with the matter.
If the talks are successful, a deal could be finalised in the coming weeks, the sources said, requesting anonymity as the matter is confidential.
Blackstone is likely to prevail in the auction for ROIC that has also attracted interest from other private equity firms, including Bain Capital, the sources said.
Earlier this year, Bain Capital’s real estate arm and retail investor 11North Partners formed a partnership to acquire and operate open-air retail centres in North America.
The sources cautioned that a transaction with Blackstone is not guaranteed and it’s possible that a rival suitor could emerge.
Blackstone, ROIC and Bain did not immediately respond to requests for comment. Reuters reported in July that Blackstone was in early-stage talks to acquire ROIC.
Owners of strip malls, pharmacy chains and retail stores have managed to pass on increased costs from high inflation to consumers over the past year, benefitting landlords like ROIC.
The company has raised rents, achieving a 13.8% increase in same-space new leases during the third quarter, according to its most recent quarterly report.
Based in San Diego, California, ROIC owned 93 shopping centres spanning about 10.5 million sq ft, according to its website.
In October, it reported net income of US$32.1mil for the quarter ended Sept 30, up from US$8.4mil in the corresponding period a year ago.
Shares of ROIC, which mainly houses supermarkets and drugstores, have risen about 11% so far this year, underperforming some other real estate investment trusts and making it an attractive target for buyout firms like Blackstone.
Limited new construction of retail real estate has also contributed to the scramble for high quality space.
Vacancies at US shopping centres stood at 5.4% for the third quarter ended Sept 30, close to the lowest level since Cushman & Wakefield started tracking the data in 2007.
This year, 6.4 million sq ft of new shopping centre space became available, compared to 10 million sq ft during the same period last year, according to Cushman & Wakefield.
Dealmaking in the real estate industry has been muted this year, with US mergers and acquisitions volumes falling about 39% to US$27.1bil, according to data from Dealogic, as high interest rates have made borrowing more expensive in the real estate industry.
Blackstone is one of the world’s largest investors in real estate, with US$336.1bil in assets in the sector as of the end of June.
The New York-based firm has recently focused on warehouses, rental housing and data centres, which comprise about 75% of its global real estate equity portfolio.
Earlier this year, Blackstone signed a deal to acquire Apartment Income-REIT for US$10bil. — Reuters
