Private equity firm Blackstone
Why the deal?
Blackstone is keen to explore the growing opportunities in the real estate market as it strives to create more value for its investments in the future. Post-recession, as business activities pick up and demand for commercial real estate grows, Blackstone is finding an opportunity to deploy its capital.
Valad, on its part, expects to cut its heavy debt through this deal. The global financial meltdown affected the fundamentals of the company to a great extent. Valad was overburdened with the debt, increasing at a rate of almost 51.3% by the end of December 2010. This deal with Blackstone will help Valad to service its debt and come out of the debt trap.
But what does Blackstone find so fascinating about this deal?
The acquisition would bring several properties like retail malls and office rentals across Australia, Europe, and New Zealand into Blackstone's fold.
This comes at a time when Blackstone is moving aggressively on both domestic and international fronts as competition intensifies. In March, the company struck a deal to buy Australia's Centro Property Group's U.S.-based assets for about $9.4 billion. The deal with Centro added 588 U.S. shopping centers to Blackstone's portfolio.
The private equity group has invested $5 billion in the real estate segment last year and is constantly making efforts to step up those investments. It made a $1 billion pact with American real estate investment trust ProLogis
The path is not without challenges. Blackstone faces competition from Kohlberg Kravis Roberts
Foolish bottom line
Blackstone's real estate investments have been performing well. The value of Blackstone's real estate funds rose nearly 70% in 2010 and another 9% in the first quarter of 2011.
The demand for commercial real estate depends on economic activities of a country. As economies across the globe show signs of recovery, the demand for commercial real estate picks up. Blackstone made an early entry into the real estate market to take advantage of this opportunity. It should gain significantly from its investments, if this strategy works out well in future.