Blueprint: Blackstone’s Berlin buy, Cabot’s $2.8bn exits, Heitman’s self-storage expansion, Meta’s big commitment to physical office

Blackstone goes long on Berlin; Cabot exits entire fund with a single $2.8 billion sale; Heitman expands its self-storage business; the biggest takeaways from the 2021 PERE America Forum; and more in today's briefing, exclusively for our valued subscribers.

He said it

“You can’t talk about ESG and have your employees drive an hour and a half to their job site”

Javier Faus, chairman of Barcelona-based Meridia Capital, on the need to support affordable housing in employment hubs during a 2021 PERE America Forum panel.

What’s new?

Let the good times roll
Blackstone is bullish on Berlin. The mega-firm formed a joint venture with Luxembourg-based Optimum Asset Management to recapitalize a closed-end fund focused solely on the German capital at a value of €800 million, PERE learned. Optimum Evolution Fund SIF – Property II closed on €320 million of equity commitments in 2011 for a diversified, value-add strategy. As a result of the recap, existing investors have the option to remain invested in the assets for a longer duration or cashing out at current valuations. Such strategies have become commonplace, particularly as competition for quality assets heats up. James Seppala, Blackstone’s head of real estate Europe, said the investment speaks to the firm’s confidence in Optimum’s management capabilities and the broader German real estate market.

One stop shopping
Cabot Properties exited its entire fifth value-add fund through a single transaction. Blackstone purchased the 124-property logistics portfolio for $2.8 billion, tapping two of its core-plus vehicles: Blackstone Real Estate Income Trust for the US assets and its open-end European fund for those in Europe [see the press release here]. The transaction comes just weeks after multifamily specialist Greystar sold an entire 30-asset apartment fund to Ivanhoé Cambridge for $3.6 billion [see our coverage here]. Such deals are not unique. Boston-based Cabot previously sold its fourth fund to Blackstone in 2018 for $1.8 billion. But with so much capital in the market, particularly in perpetual life vehicles, there is a clear advantage for owners of coveted property types – industrial and multifamily chiefly – to seek out a single large buyer rather than several smaller ones.

A Heitman for All Seasons
Heitman is spacing out in the self-storage sector. After acquiring UK self-storage business Space Station on behalf of Australian superannuation fund Sunsuper in October 2020, the Chicago-based real estate investment manager has now expanded into the sector in continental Europe. Heitman is making its purchase of German self-storage platform All Seasons at a time when the European self-storage market is “nascent and fragmented,” especially compared to the US, said Sébastian Cavé, managing director of Heitman Germany, in the deal announcement. Indeed, major operators – those with 10 or more facilities – account for less than half of the total number of self-storage properties in developed Europe, but make up more than 50 percent of the storage space in many markets in the region, according to the latest JLL report on the sector.

PERE Global Awards update

Ballots coming soon
Voting for the 2021 PERE Global Awards has been postponed by one week due to the overwhelming volume of submissions. Across all categories, we received more than 600 nominations, an increase of more than 50 percent on 2020. The launch of the awards will now be next Monday, December 13 and, in light of the delay, the voting period will also be extended by one week, to January 14, 2022.

PERE America

Back in the New York groove
The PERE America Forum, PERE’s marquee event in the US, returned to in-person form last week with well over 100 – fully vaccinated – attendees congregating at the Intercontinental Times Square. Health screenings and elbow-bump greetings were not the only new developments at the 2021 iteration. Here is what speakers and delegates were buzzing about in the world’s biggest real estate market.

  • Alternatives: With office and retail on the outs and multifamily and logistics more competitive than ever, the need for new and differentiated property types featured prominently in most panel conversations last week. With the advent of data centers, cold storage distribution and supportive housing, the emerging question in this space is where does real estate stop, and infrastructure begin?
  • Relative value: Even property types backed by ironclad demographic trends were not beyond reproach. One keynote speaker raised the possibility of yields on bid-up industrial assets falling so low that they are no longer worth the investment. Another panelist said institutional platforms have been paying more for purpose-built rental homes than individual buyers would, taking away a key risk mitigant in the single-family rental market.
  • ESG: Environmental, social and governance strategies are no longer optional features for managers. They are table stakes. That much became clear during the two-day conference. Less transparent is whether such strategies resulted in a green premium or a brown discount. The answer tends to vary by end user and region. European office tenants, for example, are often willing to pay up for sustainable space. In the US, that is less often the case.

Trending topics

Workforce focus
Investors are clamoring for affordable housing strategies, even those run by first-time fundraisers. TruAmerica, a Los Angeles-based multifamily specialist with $15 billion of assets under management, closed its debut commingled fund on $575 million this week, PERE has learned, surpassing its $400 million target. The vehicle, TruAmerica Workforce Housing Fund, is focused solely on class B apartments priced for blue collar workers. It is the largest value-add vehicle geared specifically toward that segment of the US rental housing market to date, according to PERE data. Since its formation in 2013, TruAmerica has run joint ventures focused on the sector, but more than half of the commitments to the fund came from first time investors.

Digital world, physical office
It turns out even a virtual world needs physical real estate. Meta, which hopes to digitize human socialization into online spaces, is the latest tech firm to sign a major lease for new office space in the covid era. Formerly known as Facebook, the company leased a 720,000-square-foot office campus from Tishman Speyer in Sunnyvale, California this past week [see the press release here]. It is the largest new office lease signed in the US thus far in 2021. It continues a trend that began last year [our coverage here] of thriving technology companies using the pandemic to ramp up their office holdings.

Data snapshot

Operational costs
For properties that require a lot of capital expenditure to keep them relevant to end users, strong rental growth can offset those costs. But that is not always the case. See our most recent cover story for more on this topic.

Investor watch

American industrial
A pair of sovereign wealth funds have signed on to back Investcorp‘s latest push into US industrial real estate. The investors have not been disclosed, but the Bahrain-headquartered alternative investment firm has traditionally connected Persian Gulf investors with opportunities elsewhere in the world. This latest joint venture follows Investcorp’s acquisition of an 89-industrial property portfolio in October, which put the firm’s US industrial real estate holdings to around $2.8 billion.

This week’s investor meetings
Tuesday, Dec 7

Wednesday, Dec 8

Thursday, Dec 9

Friday, Dec 10

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