We’ll keep investing in Australian property: Blackstone

The world’s biggest real estate investor, Blackstone, does not see the Australian commercial property market as overheated and expects increasing global volatility to create new investment opportunities, according to Ken Caplan, its New York-based global chief investment officer for real estate.

“We bought a half-interest in Southern Cross not long ago, so we continue to see opportunities (in Australia). We still see it as an interesting time to be investing,” Caplan says.

“Australia has done well for us. We like the investment and would like to do more.”

Foreign interest: Who’s buying Australia’s commercial property?

Blackstone has been flagged as a contender for the Ascendas hotel portfolio while earlier this week reports emerged of possible talks with James Packer over the privatisation of his Crown Group. Blackstone declined to comment.

Last month, the private equity behemoth bought a half share in the Southern Cross office complex in Melbourne for $675 million, with Canadian giant Brookfield owning the balance.

I see a lot of reasons why Australia will remain a place that investors will want to invest capital into real estate

Analysts have speculated that the yield of just over 5% is a new benchmark for the Melbourne office market.

Globally, Mr Caplan, a 19-year veteran of Blackstone, expects the pace at which yields have tightened to slow after the strong run real estate has had in recent years.

However, he does not see interest in Australia abating, rejecting talk of a commercial property bubble.

“I see a lot of reasons why Australia will remain a place that investors will want to invest capital into real estate.”

Blackstone bought a half-share in Melbourne’s Southern Cross office building for $675 million.

Blackstone was a contender for Morgan Stanley’s $9 billion Investa platform and last year was involved in three takeovers of US public real estate companies and one in Asia.

Caplan expects more such opportunities in 2016, particularly as the value of real estate investment trust fell last year.

In Australia, Blackstone has more than $5 billion of property and $1 billion of real estate debt. Last year, the group made its first push into the Australian real estate debt market, buying $750m of Australian loans as part of its $US26.5 billion deal to purchase General Electric’s global real estate assets.

“It does feel like we are in an environment where we will see more interesting opportunities. And having the dry powder across the firm of $US85 billion (funds available globally across asset classes) means we are able to take advantage of this,” Caplan says.

Australia has done well for us. We like the investment and would like to do more

Blackstone has been most active in Sydney and Melbourne office and retail property.

“That’s where I expect we will continue to be most focused,” Caplan says.

The group also expects to expand its real estate debt business on the back of the GE acquisition.

“The further capital adequacy ratios requirement on banks around the world could trigger opportunities for the debt business,” he says.

Next month Blackstone sees new management in Australia with the former managing director of Morgan Stanley Real Estate Investing, Chris Tynan to head its Australian operations. He replaces Paul Heller.

This article originally appeared on www.theaustralian.com.au/property