Blackstone close to deal to acquire shopping center owner Retail Opportunity

Blackstone is in talks to acquire Retail Opportunity Investments Corp (ROIC), which owns shopping centers in the U.S. and has a market value of $3.4 billion, including debt, according to people familiar with the matter, as detailed in an exclusive Reuters report.

If negotiations go well, the deal could be completed in the coming weeks, the sources said, asking to remain anonymous because the matter is confidential and further detailed in the report.

Blackstone is likely to win the auction for ROIC, which 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 formed a partnership to acquire and operate open-air shopping centers in North America. The sources cautioned that a deal with Blackstone is not guaranteed and a rival bidder could emerge.

Blackstone, ROIC and Bain did not immediately respond to requests for comment, and Reuters reported in July that Blackstone was in the early stages of talks to acquire ROIC.

Increased costs due to high inflation were passed on to

Owners of shopping malls, drug stores and retail stores have been able to pass on increased costs due to high inflation to consumers over the past year, benefiting landlords such as ROIC. The company increased rents, achieving a 13.8% increase in new leases in the third quarter, according to its latest quarterly report.

Brief History of Retail Opportunity Investment Corporation

Based in San Diego, California, ROIC owned 93 shopping centers totaling approximately 10.5 million square feet, according to its website. In October, the company reported net income of $32.1 million for the quarter ended Sept. 30, down from $8.4 million in the corresponding period a year ago.

Shares of ROIC, which primarily houses supermarkets and pharmacies, have risen about 11 percent this year, trailing some other real estate investment trusts and making them an attractive target for companies like Blackstone.

Limited new retail construction has also contributed to the struggle for quality space. Vacancy at U.S. malls was 5.4% in the third quarter ended Sept. 30, near the lowest level since Cushman & Wakefield began tracking the data in 2007.

There were 6.4 million square feet of new shopping center space available this year, compared with 10 million square feet during the same period last year, according to Cushman & Wakefield.

Additionally, Blackstone is one of the world’s largest real estate investors, 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 make up about 75 percent of its global real estate portfolio. Earlier this year, Blackstone signed a deal to acquire Apartment Income REIT for $10 billion, the report further said.

Real estate dealmaking has been muted this year, with U.S. mergers and acquisitions falling about 39 percent to $27.1 billion, according to Dealogic, as high interest rates made borrowing more expensive in real estate.