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Blackstone to Acquire Simply Self Storage for $1.2 Billion; Target Price $60

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The world’s leading investment firm Blackstone Group said it will acquire Simply Self Storage from Brookfield Asset Management for nearly $1.2 billion, the Wall Street Journal reported.

The nontraded real-estate investment trust, known as BREIT, will buy eight million-square-foot portfolio of self-storage facilities. The deal is expected to be announced Monday.

BREIT plans to continue to acquire smaller assets in the fragmented industry and run them under the Simply brand, Tyler Henritze, head of acquisitions in the Americas for Blackstone’s real-estate group told the WSJ.

Blackstone shares closed 0.23% lower at $54.64 on Friday; the stock is down nearly 2% so far this year.

Blackstone Stock Price Forecast

Five equity analysts forecast the average price in 12 months at $63.90 with a high forecast of $69.00 and a low forecast of $58.50. The average price target represents a 16.95% increase from the last price of $54.64. From those five analysts, four rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $69 with a high of $113 under a bull-case scenario and $30 under the worst-case scenario. The firm currently has an “overweight” rating on the asset manager’s stock. TheStreet raised Blackstone Group from a “c” rating to a “b” rating in July.

Several other analysts have also recently commented on the stock. In July, William Blair reaffirmed an “outperform” rating on shares of Blackstone Group. Bank of America decreased their target price to $58 from $62 and set a “neutral” rating for the company. Credit Suisse Group raised their target price to $65 from $64 and gave the company an “outperform” rating. At last, Barclays raised their target price to $64 from $58 and gave the company an “overweight” rating.

Analyst Comments

“Best-in-class private markets franchise with significant brand power, $156b of dry powder and strong mgmt company balance sheet uniquely position Blackstone (BX) to capitalize on a challenging recession backdrop and drive above peer growth. Fundraising machine that should raise over $211b in 2020-21, supported by newer initiatives (i.e., Infrastructure, Core+ RE, Tac Opps, Secondaries, longer-dated PE, Asian PE etc.) and existing strategies,” said Michael Cyprys, equity analysts at Morgan Stanley.

“We view BX as best positioned for the secular growth story in alternatives given their leading businesses in every major category that should command a premium multiple.”

Upside and Downside Risks

Upside: 1) Ramping cash performance fees in newer funds/strategies incl: BCP VI, VII, Tac-Opps, BREP VIII. 2) Growth in Fee-Related Earnings from fee activation of newly raised funds. 3) Faster penetration of retail channel – highlighted by Morgan Stanley.

Downside: 1) Deeper recession that delays harvesting of investments and dampens returns which lower cash earnings. 2) Regulatory risk: Increased political and regulatory scrutiny of the private equity business model.

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