Blueprint: Blackstone’s $3.4bn life science deal with Brookfield, MARK hits its hard-cap, Prologis’s logistics outlook

What Blackstone’s $3.45 billion portfolio acquisition says about life science; how the firm formerly known as Meyer Bergman fared with its first fund; Prologis’s outlook on logistics demand; and more in today's briefing, exclusively for our valued subscribers.

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He said it

“The rules of the game are changing. There’s a new muscle of flexibility our customers have and are going to want to keep.”

David Steinbach, Hines’ chief investment officer, to PERE on the need for properties to cater to occupier preferences.

What’s new?

Set the market
It is no secret that life science real estate has been a hot commodity. Less clear is how those assets should be priced. Blackstone shed some light on that by purchasing a 2.3 million-square-foot portfolio of prime laboratory office space from Brookfield for $3.45 billion this week [see the release here]. Brookfield acquired the Boston-area assets as part of its $11.4 billion take-private of Forest City Realty Trust in 2018. It was known to be marketing the properties, and life science investors had keyed in on the looming transaction as a bellwether for the sector, PERE understands.

With this acquisition, BioMed Realty, which is owned by Blackstone’s newly launched Property Partners Life Sciences fund, will have $20 billion-worth of lab and research assets, two-thirds of which are in Boston and nearby Cambridge. The deal also cements the New York firm as the leading private investor in life science real estate. And Nadeem Meghji, Blackstone’s head of Americas real estate, said the manager is not done building up the platform.

On the mark
Earlier this year, London-based manager Meyer Bergman announced that it had rebranded itself as MARK and shifted away from office and residential strategies in favor of logistics, life science and data centers. The move has clearly resonated with investors, as the firm raised €550 million for its Crossbay urban logistics platform, hitting its hard-cap thanks to equity commitments from the Townsend Group, CBRE Global Investors, Nuveen and Credit Suisse. Launched in May, the fund will target single-tenant logistics centers near major cities across Europe. Its speedy close speaks to the ravenous demand for last-mile warehouses on the continent.

Back to office
Office is back on the menu for Blackstone, at least in the right markets. The mega manager is particularly keen on Japan, where it snapped up a $1 billion portfolio from Hong Kong-based asset manager PAG. The portfolio reportedly comprises 26 properties, mostly office buildings in Tokyo. Despite the disruption of covid-19, Blackstone has been active across different sectors in Japan this year, previously focusing on logistics and multifamily sectors. It has made at least four purchases in the country in 2020, including the buy-back of a ¥300 billion apartment portfolio from Anbang and a collection of warehouses from local developer Daiwa House Industry.

Data snapshot

Shot in the dark
While a covid-19 vaccine would go a long way toward bringing most office occupiers back, there are other factors at play, too. See the full Morrison & Foerster survey here.

Trending topic

Is automation the answer?
The logistics sector is currently facing shortages in both labor and space – the result of historically low vacancy rates and a drop in speculative construction starts during Q2 and Q3 2020, according to a report from Prologis. This could lead to a potential shortfall of 50 million-140 million square feet per year through 2024. Automation, however, could help to increase productivity, which in turn could lower demand by 36 million-60 million square feet per year. Even so, net demand is still expected to exceed the long-term average annual supply of 250 million square feet, the report stated.

People moves

Reshuffling the deck
Two months after Philip LaPierre [his LinkedIn profile here] took over from Karen Brennan [her LinkedIn here] as chief executive of Europe, LaSalle Investment Management is readying a slew of other leadership changes, most notably Mark Gabbay [his LinkedIn here], CEO and chief investment officer of Asia-Pacific, succeeding Jeff Jacobson [his LinkedIn here] as global CEO, effective January 1. Other executives assuming new roles include Keith Fujii [his LinkedIn here], Japan CEO, who will replace Gabbay as Asia-Pacific CEO; Claire Tang [her LinkedIn here], head of greater China, and Kunihiko (Nick) Okumura, head of Japan acquisitions, who will jointly fill Gabbay’s Asia Pacific CIO role; Tim Kessler [his LinkedIn here], global head of corporate strategy and development, who will become global chief operating officer; and Jon Zehner [his LinkedIn here], global co-head of the client capital group, who is transitioning to CEO of Global Partner Solutions, succeeding Ed Casal [his LinkedIn here].

Investor watch

Looking up
Institutional investors are feeling more bullish about their industrial and multifamily investments than they were three months ago. In its fourth quarter forecast report, the Pension Real Estate Association found respondents are expecting warehouses to appreciate by 3.3 percent next year and apartments to increase in value by 1.2 percent. Those figures are up from 1.8 percent and 0.8 percent, respectively. Investors are still anticipating depreciation in their office and retail portfolios, but the gains in the other two property types mean they are expecting a slightly less dismal year overall, projecting a total return of -1.6 percent, up from -1.9 percent last quarter.

This week’s investor meetings

Tuesday, December 15

Wednesday, December 16

Thursday, December 17

Friday, December 18

Today’s letter was prepared by Kyle Campbell with Evelyn Lee and Christie Ou contributing.

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