Blackstone in advanced talks to acquire shopping center owner Retail Opportunity, sources say

Retail Opportunity Investments

03/11/2024 23:46

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      ROIC raised rents by 13.8% in Q3, benefiting from high
inflation
    

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      Limited new retail construction contributes to high demand
for
quality space
    

  
 (Adds details in paragraphs 7-13)
    By Anirban Sen
       NEW YORK, Nov 3 (Reuters) - Blackstone  BX.N  is in
advanced talks to acquire Retail Opportunity Investments Corp
 ROIC.O , which owns U.S. shopping centers and has a market
value of $3.4 billion including debt, according to people
familiar with the matter.
    If the talks are successful, a deal could be finalized in
the coming weeks, the sources said, requesting anonymity as the
matter is confidential.
    Blackstone is likely to prevail in the auction for ROIC that
has also attracted interest from other private equity firms,
including Bain Capital, the sources said. Earlier this year,
Bain Capital's real estate arm and retail investor 11North
Partners had formed a partnership to acquire and operate
open-air retail centers in North America. 
    The sources cautioned that a transaction with Blackstone is
not guaranteed and it's possible that a rival suitor could
emerge. 
    Blackstone, ROIC and Bain did not immediately respond to
requests for comment.
Reuters reported in July that Blackstone was in early-stage
talks to acquire ROIC.
Owners of strip malls, pharmacy chains and retail stores have
managed to pass on increased costs from high inflation to
consumers over the past year, benefiting landlords like ROIC.
    The company has raised rents, achieving a 13.8% increase in
same-space new leases during the third quarter, according to its
most recent quarterly report.  
    Based in San Diego, California, ROIC owned 93 shopping
centers spanning about 10.5 million square feet, according to
its website. In October, it reported net income of $32.1 million
for the quarter ended Sept. 30, up from $8.4 million in the
corresponding period a year ago.
    Shares of ROIC, which mainly houses supermarkets and
drugstores, have risen about 11% so far this year,
underperforming some other real estate investment trusts and
making it an attractive target for buyout firms like Blackstone.
    
    Limited new construction of retail real estate has also
contributed to the scramble for high-quality space. Vacancies at
U.S. shopping centers stood at 5.4% for the third quarter ended
Sept. 30, close to the lowest level since Cushman & Wakefield
started tracking the data in 2007.
    This year, 6.4 million square feet of new shopping center
space has become available, compared to 10 million square feet
during the same period last year, according to Cushman &
Wakefield. 
Dealmaking in the real estate industry has been muted this year,
with U.S. M&A volumes falling about 39% to $27.1 billion,
according to data from Dealogic, as high interest rates have
made borrowing more expensive in the real estate industry.
    Blackstone is one of the world's largest investors in real
estate, with $336.1 billion in assets in the sector as of the
end of June. The New York-based firm has recently focused on
warehouses, rental housing and data centers, which comprise
about 75% of its global real estate equity portfolio.
    Earlier this year, Blackstone signed a deal to acquire
Apartment Income REIT for $10 billion.

 (Reporting by Anirban Sen in New York; Editing by Lisa
Shumaker)
 ((mailto:Anirban.Sen@thomsonreuters.com; Twitter: @asenjourno;
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