Blackstone is in advanced negotiations to acquire Retail Opportunity Investments Corp., a company that owns shopping centers across the United States and has a market valuation of $3.4 billion, including its debt, according to a report.
If the discussions are successful, a deal may be concluded in the next few weeks, Reuters reported, citing people familiar with the matter.
While Blackstone is expected to submit the winning bid in the auction for ROIC, there is still a possibility that another buyer could enter the fray and emerge as a strong contender for the acquisition, the report said.
The bidding has attracted interest from several other private equity firms, including Bain Capital. Earlier this year, Bain Capital's real estate division joined forces with retail investor 11North Partners to establish a partnership aimed at acquiring open-air retail centers throughout North America, the report said.
ROIC, headquartered in San Diego, California, operates 93 shopping centers that cover approximately 10.5 million square feet. In October, ROIC reported a huge increase in net income, recording $32.1 million for the quarter ending Sept. 30, marking an increase from $8.4 million during the same quarter the previous year.
According to the latest figures from its quarterly report, the company has increased rental rates, resulting in a 13.8% rise in new leases for the same spaces during the third quarter. Despite rising inflation, strip mall owners, pharmacy chains, and retail stores have managed to pass higher costs onto consumers, ultimately benefiting landlords like ROIC.
Shares of ROIC, which primarily focuses on properties occupied by supermarkets and drugstores, have risen by nearly 11% this year. However, its growth has not matched other real estate investment trusts, making it an attractive acquisition target for firms like Blackstone.
A slowdown in new retail construction has added to the demand for high-quality space. According to Cushman & Wakefield, only 6.4 million square feet of new shopping center space became available this year, down from 10 million during the same period last year.
As of the third quarter ending Sept. 30, vacancies at U.S. shopping centers were at 5.4%, nearly the lowest level recorded since 2007, based on Cushman & Wakefield data.
This year has seen a slowdown in real estate deal-making, with U.S. mergers and acquisitions declining by 39% to $27.1 billion, according to data from Dealogic. Elevated interest rates have raised borrowing costs, impacting the market.
Based in New York, Blackstone is one of the world's largest real estate investors, boasting $336.1 billion in assets in this sector, as reported in June. Of late, the firm has concentrated on warehouses, rental housing, and data centers, which together account for close to 75% of its global real estate equity portfolio.
In June this year, Blackstone finalized its acquisition of Apartment Income REIT Corp. for $10 billion.
