Blackstone dips toe into Singapore real estate with S$220m deal

Hong Kong Blackstone's property arm has bought its first property in Singapore in a S$220 million (Dh808 million) deal, taking advantage of the pressure on some cash-strapped European financial institutions to sell assets both within and outside their home markets.

SEK, a German investment fund, sold the assets to the US buyout group to raise cash to meet redemptions, according to people familiar with the matter.

The transaction, though small, shows that the financial crisis enveloping Europe is putting pressure not only on banks but also investment funds to raise money by offloading assets.

European banks were particularly active in the developed markets of Asia, primarily Australia and Japan.

The latest BIS data for the last quarter of 2011 show European banks reduced exposure to every country in the region except Indonesia — although the pace of sales slowed after various initiatives in December by the European Central Bank, such as the longer term refinancing operations, which extended cheap three-year financing to banks.

Asian property is drawing increasing attention, with low interest rates and fears of inflation making investment in securities unattractive.

Asian push

In addition to private equity firms such as Blackstone, Asian and Middle Eastern sovereign wealth funds and pension funds have shown particular interest in Asian property.

As part of its Asia push, Blackstone recently bought a warehouse in Osaka, Japan, from an Invesco fund that is coming to the end of its life. It is also seeking to purchase Bank of Scotland (BoS) International's Australian real estate loan book, which is valued at $2 billion, as it winds down.

Other potential bidders include Macquarie, Morgan Stanley's real estate fund, Goldman Sachs and Brookfield Asset Management, say people familiar with the matter.

Bank of Scotland International, a unit of Lloyds Banking Group, has already sold another $2 billion of that loan book to a group that included Morgan Stanley, Brookfield and Goldman.

At the same time that European sellers are putting attractive assets on the block, companies facing cash flow problems in India are also selling assets, while the property sector in China is facing credit constraints.

Building a profile

Blackstone is also looking at buying office blocks in Bengaluru from UB Holdings, the parent of cash-strapped Kingfisher Airlines. The US buyout group already owns a large office complex in Bengaluru and one in Pune in contrast to the approach of many investors who have pulled back in India, blaming regulatory issues and deteriorating economic fundamentals.

Blackstone's real estate arm now has $48 billion under management, making its property arm comparable in size to TPG's private equity assets.

Since taking over the management of a portfolio of real estate from Merrill Lynch almost two years ago, it has built its profile in the region. Unlike many rivals, including Goldman and Morgan Stanley, Blackstone did not cross- collateralise its property assets, which helped it escape the global financial crisis almost unscathed.

Blackstone declined to comment on the deals.