Blueprint: Bain gets back on the fundraising trail, Prologis’s big industrial buy from Blackstone, GCP’s $3.2bn fundraise

Bain Capital re-enters the market with its third real estate fund, Prologis buys $3.1 billion of industrial property from Blackstone on its balance sheet, GCP crosses the $3 billion threshold in its open-ended Japan fund; and more in today's briefing, exclusively for our valued subscribers.

-

They said it

“Real estate loans totaling some $2.4 trillion globally will mature over the next few years, forcing a day of reckoning.”

John Murray, portfolio manager, global private real estate, and Francois Trausch, chief executive officer and chief investment officer at PIMCO Prime Real Estate, warn of the threat and opportunity of this financing predicament in the firm’s sector white paper, published last week.

What’s new

Bain’s back: Dan Cummings, Bain Capital’s partner and head of real estate, is back in the market with the third iteration in the firm’s flagship real estate fund series (Source: Bain)

Bain’s return to market
Bain Capital has had a fruitful six years of fundraising since launching its real estate business in 2017. Two years after establishing the platform, the Boston-based manager raised $1.5 billion for its debut real estate fund in 2019, against a $1 billion target. Two years after that, Bain went on to close on $3 billion for the successor vehicle, Bain Capital Real Estate Fund II – nearly double its $1.6 billion target. Those fundraises helped Bain’s real estate business to ascend to number 20 in the PERE 100 ranking – the latest iteration of which will be unveiled next week – in a span of just five years. Now, the firm is back in the market with the third offering in its real estate fund series, according to an SEC filing. PERE understands Fund III’s target exceeds the size of the predecessor vehicle. Meanwhile, Bain reportedly is also seeking to raise $4 billion for its latest global special situations fund, which invests in multiple asset classes including real estate.

Prologis puts $3.1bn deal on balance sheet
San Francisco-based industrial specialist Prologis paid $3.1 billion for a 14 million-square-foot portfolio of industrial properties previously held in opportunistic funds managed by New York-based Blackstone. Prologis used balance sheet capital to execute the deal, but the portfolio could be recapitalized with third-party capital in the future, a Prologis spokesperson told PERE. The properties are concentrated in and around major cities in the US. “We have continued to evaluate and pursue acquisitions, especially as the challenges to replace this real estate grow due to escalating construction costs and headwinds for entitlement,” the spokesperson said.

GCP’s growth ambitions in Japan
Industrial powerhouse GLP Capital Partners continues to bolster its position in Japan. The Singapore-based firm has raised ¥453 billion ($3.2 billion; €2.9 billion) for its flagship open-end logistics core fund GLP Japan Income Fund since it was launched in 2020. Having accumulated ¥700 billion of AUM, the vehicle is on track to grow its AUM to ¥1 trillion by 2025, PERE understands. But the firm’s growth plans in Japan do not end there, as GCP is planning to introduce a digital infrastructure strategy targeting data centers in the country later this year. Although the firm has invested in Japanese data centers before, this would be the first time GCP is extending such investment opportunities to third-party investors. Currently, GCP manages approximately $30 billion of AUM in Japan across both private and public strategies, including a J-REIT that just completed a $220 million public offering. Read more about GCP’s fundraise here.

Valesco makes another trophy office bet
With the office market experiencing a dearth of sales, the €460 million sale and leaseback of the Sequana Tower in Paris by hospitality firm Accor to London-headquartered manager Valesco Group was always going to turn heads. The trade, announced on Thursday, was the biggest in the sector in both France and continental Europe since 2022, the hospitality firm said in a statement. For Valesco, the deal constitutes a contrarian bet when put into the context of wider inactivity. According to global broker CBRE, office investment fell 74 percent on a year-on-year basis in Q1 2023, with just €9 billion of assets changing hands in the region during the period. For Valesco, which invests on behalf of Middle Eastern and Asian institutions, the acquisition nonetheless marks continued conviction in collecting trophy office towers in the region. The transaction follows other Valesco office deals, including the €1.2 billion purchase of Finance Tower in Brussels from Dutch property firms Breevast and ZBG in 2020 and Twin City Tower in Slovakia with Korean financial services firm AIP Asset Management in a deal valued at €120 million in 2019.

Trending topics

Artificial dissemination
Artificial intelligence is causing disruption around the world and is spreading into real estate, according to global brokerage firm JLL’s report Artificial Intelligence: Real Estate Revolution or Evolution. JLL predicts that growth in AI will translate to more than 17 million square feet of real estate demand from the sector by the end of this year in the US alone. One area where change is already being driven is in data centers. AI infrastructure location criteria puts more emphasis on lower energy prices and lower land costs, the report stated. This means less crowded markets like Atlanta, Malaysia and Thailand, to name a few globally, are seeing heightened growth.

US cities top construction costs list
Six US cities are among the top 10 most expensive cities in which to build property, according to global consultancy Turner & Townsend’s 2023 International Construction Market Survey. Globally construction costs have risen but New York, San Francisco, Boston, Los Angeles, Chicago and Seattle were in the top 10 because of the strength of the US dollar and rampant inflation, the report stated. In fact, Atlanta, Tampa, Phoenix, Nashville and Austin all saw increases from 2022 numbers, with Tampa now a more expensive market to build than London on an average cost to build basis and the other high-growth US markets not far behind. A key factor in driving costs is legislation passed in the last couple of years, including the Infrastructure Investment and Jobs Act in 2021 and Inflation Reduction Act last year. Both, among others, have collectively driven construction activity in the US, the report said.

Fast-tracking office conversions
Upgrading older office stock is expensive, but obtaining the planning necessary to convert them to other uses can be lengthy and complicated. To reduce the risk of empty offices, the City of London plans to expedite the planning approval process for office conversions. Speaking to the Financial Times this week, Shravan Joshi, chair of the City of London’s planning and transportation committee, said 20 percent of offices in the Square Mile are non-prime in quality and risk becoming “stranded.” He said the committee was “sympathetic” to converting offices into business-compatible, educational or cultural uses such as hotels, galleries, universities and research buildings, and that “there will be some savings in time and costs for developers.”

Residential conversion, however, was not encouraged, given the added constraints on noise and light this could place on future office developments.

Back in 2021, the City Corporation announced it was planning for 1,500 new residential units by 2030 and would “explore new ways to use vacant space” – an announcement that prompted policy chair Catherine McGuinness to swiftly deny that offices would be converted to flats to achieve this goal, dubbing press headlines at the time as “very misleading.”

Data snapshot

Hitting a turning point
Private real estate performance is beginning to mimic public market performance from a year ago, according to a report from New York-based Cohen & Steers last week. A second consecutive quarter of negative performance comes as the public markets saw a second quarter in a row of positive returns.

People

Another inside job
For the second week in a row, PERE has reported on an Evercore executive leaving the investment bank to go in-house with a real estate manager. As we revealed Monday, Manjul Ramchandani [his LinkedIn profile here], formerly a managing director at Evercore, has joined Atlanta-based multifamily specialist Cortland’s capital markets team after more than 20 years as a placement agent. This follows Sarah Warmisham, founding partner in Evercore’s real estate capital advisory group, departing for New York-based manager Related Fund Management to become head of international capital markets. Wendy Norton, managing director at New York-based executive search firm Norgay Partners, said an in-house role has a particular appeal for fundraising executives: “Candidates in an in-house role versus a placement agent are getting a ‘seat at the table’ and the ability to drive a strategy.”

Investor watch

This week’s investor meetings

Tuesday, Jun 27

Wednesday, June 28

Thursday, June 29

Friday, June 30

Today’s letter was prepared by Peter Benson, with Jonathan Brasse, Evelyn Lee, Charlotte D’Souza and Christie Ou contributing