Blueprint: Blackstone and Brookfield’s office deal, KKR’s self-storage ambitions, AXA’s $2bn US expansion

AXA continues its global industrial expansion with a $2 billion acquisition in the US; KKR puts self-storage under the microscope with $300 million platform; Kayne Anderson backs $1 billion European student lending platform; and more in today's briefing, exclusively for our valued subscribers.

He said it

“The life sciences sector is experiencing an era of unprecedented growth driven by a rise in both public and private funding combined with a post-pandemic sense of urgency and market opportunity”

David Steinbach , global CIO at Houston-based manager Hines, in an announcement about the firm’s latest white paper on the office sector, published last week.

What’s new?

Return of office?
The two biggest firms in private real estate are coming together for a blockbuster deal to close out 2021 – and the asset at hand is a trophy office tower, no less. Brookfield is reportedly in the process of finalizing a deal to sell a 49 percent stake in One Manhattan West to Blackstone (see the Wall Street Journal’s coverage here). The deal would value the 2.1 million square foot building at $2.85 billion. The transaction is the latest indication that, despite uncertainty about the sector, the biggest owners and occupiers remain committed to highly amenitized office properties in prime locations. Opened in 2019, One Manhattan West is 90 percent leased with a tenant list including law firm Skadden, Arps, Slate, Meagher & Flom, consulting firm Accenture and the National Hockey League.

The new Alpha
KKR‘s next big aggregation play will be in self-storage. The New York-based firm launched a platform called Alpha Storage Properties last week and hired industry vet Jonathan Perry (his LinkedIn here) to run it. KKR has already amassed a 16-property portfolio for the strategy valued at $300 million. Big deals, such as its acquisition of Global Atlantic Financial Group (see our affiliate publication PE Hub‘s coverage here) and its $15 billion privatization of data center specialist CyrusOne (see our coverage here) have dominated the headlines for KKR during its recent real estate expansion – putting it now safely over $36 billion in AUM – but asset-by-asset aggregation has been the backbone of its growth. Take its logistics arm, Alpha Industrial Properties, which sold a 149-property portfolio to Oxford Properties for $2.2 billion this year. That pool of assets was built through more than 50 individual transactions. Given the success of that exit, do not be surprised if KKR’s self-storage platform shares more than a common naming convention.

Further expansion
One week after its €900 million venture into the Nordic region, AXA IM Alts has finalized another regional expansion for its global industrial platform, this time in the US. The French investor and manager has acquired $1.2 billion of logistics assets in the country from sector specialist Dermody Properties. The Nevada-based firm sold the 23-asset portfolio from its 2018-vintage Dermody Properties Industrial Fund II. As part of the deal between the two firms, Dermody will continue operating the assets and partner with AXA on the deployment of $850 million of additional capital into the sector over the next two years. Combined, the acquisitions will bring AXA’s exposure to US logistics to $3.4 billion.

Trending topics

A uni play for Europe
Kayne Anderson Real Estate is taking its student housing expertise across the pond. The American niche real estate specialist is backing a $1 billion joint venture to provide debt financing for European student housing properties. The platform, Rhize Capital, will operate through a partnership between Kayne Anderson and Kinetic Capital, a London-based lending platform. Focused on loans of £100 million ($132 million; €117 million) or more, the strategy provides an entry point into Europe for Kayne Anderson as well as a point of validation for Kinetic Capital, which was launched by student housing specialist Global Student Accommodation UK last summer.

Wanted: ESG hires in Asia-Pacific
Sustainability and climate risk-related talents are in high demand in Asia-Pacific right now. Some 42 percent of real estate fund managers in the region are planning to increase their headcounts in these areas in 2022, according to a survey published by ANREV and PwC last week. The report stated that 90 percent of the 31 respondents have a formal policy in sustainability and climate risk and 19 percent think the issue can be a deal-breaker when making investment decisions. As a result, 71 percent have hired, or are planning to hire, external consultants to address their ESG policies. Although the survey reflects an optimistic outlook for real estate hiring in the region, Paul Walters, partner at PwC, pointed out that recruiting talents in portfolio management, sustainability and compliance will pose “significant challenges” for the industry in 2022.

Data snapshot

America last
North American firms are falling behind their global peers when it comes to hiring designated diversity, equity and inclusion personnel.

People move

NREP adds female partner
A pioneer already on the sustainability front, Nordic Real Estate Partners is also taking steps to address diversity challenges. Last week, the Nordics-specialist manager announced Didde Maria Kristensen (her LinkedIn profile here) had become NREP’s first woman to reach partner level. She and Alfred Eklöf (LinkedIn here) have become the Copenhagen-headquartered firm’s latest partners, bringing its partnership headcount to 16. Kristensen continues to serve as head of investor relations, having joined in 2015 from DONG EnergyEklöf joined in 2014 from McKinsey and previously served as an investment director for NREP, helping to build the firm’s logistics vertical, Logicenters, and most recently heading up the firm’s open-end fund Income+. Read about the fund, which is initially targeting €3 billion, here.

2021 PERE Global Awards

Vote now
Predictably, the votes are piling in for the 70 categories in this year’s PERE Global Awards. If you have not done so already, make sure you click here to cast your votes to determine the private real estate sector’s most impressive investors, managers, advisors and individuals. This year’s awards cover categories across regions (Global, North America, Europe and Asia-Pacific), and recognize major milestones in the areas of ESG and proptech for the first time. Please note the deadline for voting is midnight PST on Friday, January 14, 2022.

Investor watch

Going public
QuadReal, the real estate arm of the British Columbia pension system, has acquired a 46 percent stake in a New York-based investment adviser (see the release here). The firm, Ranger Global Real Estate Advisors, exclusively manages portfolios of real estate securities. QuadReal became interested in the firm after experiencing its outperformance first hand, having invested $1 billion with Ranger at the beginning of 2020. The investor did not say what its rate of return has been since then, but noted that Ranger’s global composite had produced a 33.7 percent net return over the past year, thereby exceeding the 30.8 percent return tracked by trade group Nareit.

There are no investor meetings scheduled during the rest of this week

Today’s letter was prepared by Kyle Campbell, with Christie Ou and Peter Benson contributing