NEW YORK: Blackstone is in advanced talks to acquire Retail Opportunity Investments Corp , which owns U.S. shopping centers and has a market value of US$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 per cent 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 US$32.1 million for the quarter ended Sept. 30, up from US$8.4 million in the corresponding period a year ago.
Shares of ROIC, which mainly houses supermarkets and drugstores, have risen about 11 per cent 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 per cent 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 per cent to US$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 US$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 per cent of its global real estate equity portfolio.
Earlier this year, Blackstone signed a deal to acquire Apartment Income REIT for US$10 billion.