Blueprint: AIG’s big affordable housing exit; GIC’s massive bet on US offices; Brookfield goes digital in India

AIG sells a giant US housing portfolio; GIC and partners plow $1bn into US offices; Brookfield teams up again with Digital Realty; and more in today's briefing, exclusively for our valued subscribers.

He said it

“We’ve embraced technology and it’s given us a road map for how to change our business.”

Rob Speyer on Tishman Speyer courting Chinese tech companies as tenants.

What’s new?

Three takeaways from AIG’s blockbuster sale to Blackstone
In one of the largest strategic entity-level transactions involving private real estate in recent years, Blackstone has agreed to acquire certain assets and a partial equity stake in a retirement business from American International Group for an aggregate $7.3 billion. Here is what we know of the mammoth transaction so far:

  • Blackstone is acquiring some of AIG’s affordable housing assets that the insurer has held for more than 30 years. BREIT, the New York-based manager’s perpetual capital vehicle, will invest approximately $5.1 billion to acquire AIG’s interests in a US affordable housing portfolio.
  • Blackstone is also to take a 9.9 percent equity stake in the insurer’s life and retirement business for $2.2 billion. As part of the entity-level deal, Blackstone will also manage an initial $50 billion investment portfolio, which would increase to $92.5 billion over the next six years.
  • AIG’s motivations for the transaction are multifold. Peter Zaffino, president and chief executive at AIG, noted how the deal provides the firm “flexibility as it continues to separate” the life and retirement business, and gives “significant new capital for AIG to deploy to support its capital management priorities.” The housing assets, meanwhile, were believed to “no longer be core to AIG’s long-term investment strategy.”

GIC, CPP’s $1bn gamble on US offices
Even as uncertainty around offices continues to put a strain on the sector’s recovery timeline, some investors remain bullish as reopening plans are executed. CPP Investments and GIC have formed a co-investment program with developer Boston Properties to acquire office assets across select US markets. The partners are planning to invest $1 billion in aggregate equity, with GIC allocating $500 million and CPP Investment and Boston Properties committing the remainder to the opportunistic investment program. Including leverage, the initial investment capacity is expected to be around $2 billion. Owen Thomas, chief executive of Boston Properties, said in the announcement that the deal “underscores the attractiveness of Class A office investment opportunities,” while GIC’s managing director for Americas real estate Adam Gallistel pointed out how companies would continue to need “collaborative workspaces to build culture, innovate and win the war for talent.”

Brookfield’s digital passage to India
Brookfield and US real estate investment trust Digital Realty have joined forces to invest in data centers in India. The two have partnered in a 50:50 joint venture under the brand BAM Digital Realty to build and operate data centers in multiple Indian metro markets. This is the second time that Brookfield and Digital Realty have teamed up to invest in data centers in emerging markets, having previously formed a joint venture in 2019 where Brookfield purchased a 49 percent stake in Ascenty, a data center provider in Brazil, from Digital Realty. Brookfield and Digital Realty are the latest in an influx of international investors into India’s digital real estate market, including US data center operator EdgeConneX, which established a partnership with Indian infrastructure company Adani Enterprises in February.

Trending topics

APG, Blackstone double down on student beds
Dutch pension manager APG Asset Management and New York-based private equity giant Blackstone are making another big bet in UK student housing with the take-private of the London Stock Exchange-listed GCP Student Living for approximately £969 million ($1.32 billion; €1.12 billion).

APG and Blackstone are acquiring the UK student accommodation real estate investment trust through an approximately 60:40 consortium formed by its student housing companies, Scape Living and iQ Student Accommodation, respectively. The deal, which is expected to close during the fourth quarter, follows Blackstone’s acquisition of iQ from Wellcome Trust and Goldman Sachs for $6 billion in 2020. Since then, multiple private equity firms have made forays into the country’s student housing sector.

Thinking different about affordable housing
Who said social impact property investing was the preserve of the real estate sector? Technology giant Apple certainly does not think so. Late last week, the company announced it deployed $1 billion of its $2.5 billion plan to help address housing availability and affordability issues in its home state of California. The scheme, which involves partnerships with various local government entities, comprises a $1 billion affordable housing investment fund; a $1 billion first-time homebuyer mortgage assistance fund; the use of $300 million of Apple-owned and available land for affordable housing; a $150 million fund specifically for San Francisco’s Bay Area; and $50 million to support vulnerable populations.

Core funds of funds outperform
Core private real estate funds of funds are on the ascendancy, according to associations INREVANREV and NCREIF’s Fund Manager Survey 2021 published last Wednesday. The associations said funds of funds accounted for at least $51 billion in asset value at the end of 2020, reflecting the third consecutive year of overall growth for the investment style. At the heart of this growth are funds of funds carrying a core strategy. They now account for 48 percent by number of funds, but 94 percent by total net asset value. Such increased engagement is hardly surprising when you consider core fund of funds’ performance. The associations said core vehicles outperformed non-core for the fourth time in the past five years with returns of 1.9 percent versus -3.1 in 2020.

Data snapshot

Rising in dominance
Unlisted real estate investors are expected to become among the most active in life sciences over the next several years, according to a survey by law firm Ropes & Gray.

People moves

LaSalle’s European makeover
What do customers want? Chicago-based manager LaSalle Investment Management thinks a “more integrated approach to the acquisition, management and divestment of assets” is the answer. Enter the newly created European Transactions and Asset Management team to execute on this thesis. The unit will be headed by Paris-based Beverley Kilbride (her LinkedIn profile here). She will preside over four heads of transactions: Jérôme Hamelin (his LinkedIn profile here), Andreas Wesner (his LinkedIn profile here), Francesco Coviello (his LinkedIn profile here) and Robin James (his LinkedIn profile here). The quartet will be responsible for all acquisitions and sales in Western Continental Europe, Northern Continental Europe, Southern Continental Europe and Central and Eastern Europe, and the UK and Ireland, respectively. Time for the firm’s European executives to stop identifying as ‘buy-guys’ or ‘sell-guys’ then.

Investor watch

Round three for POBA and CBRE GI
South Korea’s Public Officials Benefit Association has re-upped with CBRE Global Investors, making an additional €200 million equity commitment to a separately managed account to invest in European real estate. The latest equity commitment, which provides an investment capacity of more than €400 million with leverage, represents the third tranche of capital committed to the SMA since POBA first awarded CBRE GI and IGIS Asset Management the European investment mandate in 2016. The mandate, which originally focused on offices, has since been expanded to include residential, logistics and alternative sectors such as healthcare and data centers, as well as listed real estate securities.

This week’s investor meetings
Wednesday, July 21

Friday, July 23

Today’s letter was prepared by Evelyn Lee with Jonathan BrasseArshiya Khullar and Christie Ou contributing