19 December, Il Sole 24 Ore
While it’s getting ready to fight for the offices of Corriere della Sera, Blackstone also aims at growing in the European real estate market, where Italy is one of the core markets.
James Seppala, senior managing director for the real estate division and head of the European activities, uses few but determined words to give an idea of the strategy that was presented by as Il Sole 24 Ore interviewed him.
“In Europe, we hold a real estate portfolio of almost 70 billion euro, and we want to grow further, in Italy as well”, he said. These words clear any doubt about the possible loss of interest in Italy. The rumours were denied with the acquisition of 35% of the capital of Kryalos, the company of Paolo Bottelli that has been managing the assets in Italy on behalf of the American group so far, and by the investments in the Italian real estate market amounting in total to 500 million carried out in the last 12 months.
Seppala studied at Harvard and previously worked for Goldman Sachs in London and New York. It was clear for him that it was necessary to accelerate on the European activities. Since he started working for Blackstone, Seppala closed several important deals. For instance, the sale last summer of the logistic division Logicor to a Chinese company belonging to the group China Investment Corporation (Cic) for 12.25 billion euro, a record for the European real estate sector.
The Blackstone real estate portfolio includes assets in the US, Europe, Asia and Latin America. He continues: “Blackstone is active in all the main sectors: from offices, where we’re present in Milan and Rome, to logistics, residential and retail. We’re a little more selective in this last segment. We’re also increasingly investing in the European hospitality sector. In Spain, for instance, we have acquired 50 hotels in the last 18 months. We want to create an Italian hospitality portfolio”. It’s not a secret that Blackstone was assessing the acquisition of the luxury hotel chain Belmond, but it was caught off guard, like the Middle Eastern and the Asian funds also participating in the competition, by the high offer made by Lvmh which will pay 25 dollars per share for a total of 3.2 billion dollars.
“Working in Italy is harder than elsewhere, and this is a little frustrating. In Italy, hotels are generally family run, and it’s often difficult finding the right product to purchase”, he said.
In the last 22 years, Blackstone has invested 26 billion euro in the European real estate market. Today, its European portfolio is worth 66 billion. The portfolio is managed through closed-end real estate funds and through the open-end fund Blackstone Property Partners Europe. In Italy, Blackstone started consistently investing in 2013 when it carried out the first acquisition concerning the Corriere della Sera offices. Blackstone was a sort of pioneer with its opportunistic approach in a moment of crisis and uncertainty for the country, which resulted in several international investors exiting the Italian market. Today, that deal closed for 120 million euro is at the centre of a litigation between the American company and Urbano Cairo, the new owner of Rcs, who started a legal action claiming that sale was void. Seppala commented: “Our obligation is to preserve the interests of our investors, which are mainly retirement funds from all over the world”. According to the rumours, the American company will sue Cairo for the damages caused by this legal action, as it prevented Blackstone from selling the asset to Allianz last summer. The German insurance company offered 250 million for the building in Via Solferino – San Marco. Besides Corriere della Sera, the building also accommodates the offices of Cdp, Loro Piana and an Ubi bank branch.
Italy remains an important market, “although such litigations risk to impact the trust of international investors – continues Seppala -. The situation is very worrying for those investors interested in the Italian market. In five years, nobody had ever doubted that the amount paid was what the market value at the time”.
In Italy, Blackstone has achieved a two-billion-euro portfolio with a focus on Milan, where rents have grown by 5%, and on Rome. In Milan, the group owns the former Poste building in Piazza Cordusio and a building in Via Santa Margherita, which might be rented to Goldman Sachs and Huawei. In Rome, the company bought Palazzo Sturzo, which used to be the Democrazia Cristiana offices. The retail holdings are also considerable, one billion, although the outlets are now for sale for about 800 million.
Whatever the next steps will be, Blackstone hopes that James Seppala will not lose his magic touch when it comes to real estate.
Source: Il Sole 24 Ore
Translator: Cristina Ambrosi