BlackRock Expands Its Asian Real Estate Presence With MGPA Deal

BlackRock (NYSE:BLK) announced its decision to acquire independently-managed private equity real estate investment advisory firm MGPA early Tuesday morning in what comes as the latest move by the asset management giant to increase its presence in the growing global real estate investment industry. ^[1] BlackRock already has a strong position in the U.S. and the U.K. real estate investment markets, and thanks to the complementary nature of MGPA’s business, the acquisition will give it a sizable presence in the Asia-Pacific and European regions.

While the financial details of the acquisition have not been disclosed, the deal is likely to close in the third quarter of the year and will double the size of BlackRock’s real estate assets under management to $25 billion.

We are in the process of updating our $267 price estimate for BlackRock’s stock to include the impact of this acquisition.

See our full analysis for BlackRock

BlackRock has been growing its real estate solutions business steadily over the recent past largely through acquisitions. Last December, the company announced that it was buying U.K. real estate funds with about half a billion dollars in managed assets from Deutsche Bank (see BlackRock Acquires U.K. Real Estate Funds From Deutsche Bank). But almost all the expansion in the past was restricted to the real estate markets of the U.S. and the U.K. The MGPA acquisition will change this scenario by the end of this year and BlackRock will boast of a sizable presence in each of the six biggest commercial real estate markets which make up nearly three-fourths of the global industry.

BlackRock’s focus on alternate investment solutions like real estate is largely justified given the growing demand among investors for high-yield investment options in the current low interest rate environment. As is evident from the chart above, alternate investment funds were not high on investor preference lists over the last few years. But this situation is expected to change going forward – something we capture in our forecast for BlackRock’s alternative assets under management.

The MGPA deal will bring in $12 billion in real estate assets under management to add to BlackRock’s existing $13 billion pool besides increasing its 10,600+ workforce by 220.

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1. BlackRock to Acquire MGPA, BlackRock Press Releases, May 21 2013 [↩]