BlackRock Acquires U.K. Real Estate Funds From Deutsche Bank
BlackRock (NYSE:BLK) inked a deal with Deutsche Bank (NYSE:DB) earlier this week to acquire U.K.-based property funds managed by the latter’s RREEF unit. [1] While BlackRock intends to expand its presence in the U.K.’s real estate market with the acquisition, the decision on Deutsche Bank’s part follows its failure to sell the alternate asset management RREEF business to Guggenheim Partners earlier this year. [2] On completion, the deal will add £335 million ($543 million) worth of assets to BlackRock’s U.K. Property Fund.
We maintain a $213 price estimate for BlackRock’s stock, which is around its current market price.
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BlackRock, the world’s largest asset manager, provides a diversified portfolio of investment offerings to its clients so that they can pick and choose the type of investment best suiting their risk profiles and target returns. While equity traded funds (ETFs) have undoubtedly shown the largest increase in demand from investors in the last decade, this period has also witnessed a substantial increase in alternative investment options – something mirrored by the size of BlackRock’s alternative assets under management in the chart above.
But one of the alternate investment options that fell out of investor grace following the global economic recession in 2008 is the real estate market. And despite the continuing slowdown in Europe, the improving real estate situation in the U.S. is slowly but steadily rekindling investor interest in real estate.
Deutsche Bank’s RREEF business unit – part of its global asset & wealth management division – was categorized by the bank as a non-core unit recently, as the bank works towards improving shareholder returns by streamlining its global operations as part of Strategy 2015+ (see Deutsche Bank Set For Complete Shake-up As Part Of ‘Strategy 2015+’). The deal with BlackRock rids Deutsche Bank of £335 million ($543 million) in real estate assets in the U.K.
As for BlackRock, these assets will add to over £2 billion ($3.25 billion) in property funds it already manages in the U.K. while bringing in 64 new clients. BlackRock also believes that it will be able to extract better returns from these assets than RREEF – which will help its alternate investment fee represented below.
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Notes:- BlackRock Buys U.K. Property Funds From Deutsche Bank’s RREEF, Bloomberg, Dec 18 2012 [↩]
- Deutsche Bank and Guggenheim Partners conclude negotiations on RREEF, Deutsche Bank Press Releases, Jun 20 2012 [↩]