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Analysis: Blackstone’s mega deal seems to belie trade war fears

By Paul Mackintosh  
Jun 5, 2019

Blackstone has broken records in real estate for the second time this year. The private equity manager is acquiring US logistics assets from Singapore’s GLP for US$18.7 billion, a deal that it bills as “the largest-ever private real estate transaction globally”. This comes on top of the closing of its Blackstone Real Estate Partners IX LP fund earlier this year at $20 billion, the largest property fund ever raised.

The peaky new deal is taking place amid trade tensions that threaten to tip the global, and especially the US, economy into a recession, which could hurt trade levels and demand for logistics services.

But Blackstone is apparently counting on the e-commerce boom and the need for Amazon-style delivery and fulfilment services continuing, to pay back its investment. “Logistics is our highest conviction global investment theme today, and we look forward to building on our existing portfolio to meet the growing e-commerce demand,” Ken Caplan, global co-head of Blackstone Real Estate, says in a statement announcing the deal.

GLP itself is also a record-holder, having delisted from the Singapore Exchange in January 2018 after a $12 billion privatisation led by a Chinese private equity consortium in Asia’s largest ever take-private deal. Blackstone’s US acquisition could therefore be qualified as a secondary transaction.

So how about those trends that are giving Blackstone such conviction? Well, market research firm Technavio’s Global Logistics Industry Report 2018-2022 predicts the global logistics sector will see compound annual growth rate (CAGR) of over 7% by the end of 2022. Powering this growth, according to the report, are factors such as increasing urbanisation and higher digital literacy on the consumption side, and more efficient fulfilment businesses employing efficient inventory management and warehousing on the supply side. Technologies supporting these trends include blockchain, delivery drones, the Internet of Things, data analytics, and big data optimisation of logistics flows.

None of these trends are likely to go away in a trade war. Tariffs and trade tensions may crimp trade flows, but the logistics industry will be transformed by the interconnected demographic and technology trends regardless.

Of course, one should never underestimate the power of human stupidity to mess things up. But a 7%+ CAGR looks as sound a bet in these low-yield times as any could be.