Blackstone Snags $2.8B CMBS Loan to Buy Grocery REIT

Blackstone (BX) secured a $2.8B CMBS loan to finance its $4B acquisition of Retail Opportunity Investments Corporation (ROIC), a REIT focused on grocery-anchored shopping centers, per Commercial Observer.

Deal Details

Perhaps unsurprisingly, the loan is expected to be one of the largest CMBS deals in the retail sector this year, even though we’re still in Q1.

The transaction, which closed on Feb. 12, was financed with a mix of debt and $1.18B in Blackstone equity. The two-year, floating-rate loan includes three one-year extension options. Blackstone is also entering into an interest rate cap agreement with a 5% strike rate to hedge against volatility. 

The loan was structured by Morgan Stanley (MS), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC).

Look Inside The Portfolio

The massive loan is backed by 85 of ROIC’s 93 assets, concentrated in Los Angeles, Seattle, San Francisco, and Portland, OR.

ROIC’s portfolio is 95.6% leased, with over 1.4K tenants. Grocery chains Ralphs (2.4% of rent) and Safeway (2.1%) are the biggest tenants, showing the portfolio’s reliance on groceries and essentials. The largest property is the 84%-occupied, 755K SF Fallbrook Shopping Center in Los Angeles.

Zooming Out

This deal underscores renewed investor interest in grocery-anchored retail, which has outperformed traditional brick-and-mortar retail amid shifting consumer habits.

Unlike traditional retail, grocery-anchored centers have seen steady demand. KBRA noted that limited new supply since the 2008 GFC has helped keep occupancy levels high. Blackstone also believes West Coast retail has been undervalued due to extended pandemic lockdowns in the region.

As CMBS issuance rebounds, this deal could be a benchmark for future retail securitizations.