Blueprint: Blackstone’s blockbuster multifamily deal, Bain’s open-air retail bet, senior capital raiser hires at GID, CBRE IM and Affinius

Blackstone is making a splash in the multifamily market by acquiring all outstanding common shares in Apartment Income REIT in a $10 billion deal for BREP X; Bain Capital Real Estate looks to re-enter open-air retail space with a new North American joint venture; GID Investment Advisers, Affinius Capital and CBRE Investment Management all hire senior capital raisers; and more in today's briefing, exclusively for our valued subscribers.

-

They said it

“I think where we see the most acute risks at the moment are in the rent-stabilized and rent-controlled space”

Brian Thies, director of North American banks at ratings agency Fitch Ratings, speaking on PEI Group’s Spotlight podcast about banks’ multifamily exposure.

What’s new

Blackstone’s Meghji: has made a big dent in deploying $65 billion of dry powder with the firm’s AIR Communities deal (Source: Blackstone/AIR Communities)

Blackstone lays marker in the sand

Mega-manager Blackstone has made clear its intention to deploy more than $65 billion in dry powder into a dislocated real estate market, with Nadeem Meghji, the firm’s global co-head of real estate, telling PERE in January it would play “offense” and “invest with conviction when others may be nervous.” Now, through one transaction, Blackstone has cemented its conviction not just in the US multifamily sector – where others are pulling back amid oversupply issues – but also in the timing of private real estate’s new cycle.

The manager announced Blackstone Real Estate Partners X will acquire all outstanding common shares in Apartment Income REIT, known as AIR Communities, in an all-cash deal valued at around $10 billion including debt. AIR Communities has 76 rental housing communities, mainly in coastal markets, and Blackstone plans to invest more than $400 million into improving them. This deal marks the New York manager’s largest-ever transaction in the multifamily sector; its second take-private in the sector this year, following the $3.5 billion deal for Tricon Residential in January; and its largest real estate deal since the recapitalization of European last-mile logistics business Mileway in 2022.

Bain goes shopping for retail

Bain Capital Real Estate is eyeing a return to the open-air retail space by forming a partnership with 11North Partners, a New York-based retail real estate investment firm. The partners will seek to buy and operate assets in the US and Canada in the subsector, which has a healthier tenant base than enclosed malls because of its preponderance of necessity-based retailers, according to Ryan Cotton, head of the real estate arm of the Boston-based private equity firm. “Given transaction volume in the sector of approximately $23 billion annually, we believe we’ll be able to create a high-quality portfolio of scale,” he said, adding that open-air assets are relatively insulated by the effects of e-commerce.

Before spinning out to Bain from Harvard Management Company in 2018, the real estate team previously managed open-air retail centers in its portfolio, but those investments have since been realized. The firm currently does not own any standalone retail assets.

A woodsy BTR partnership

Japan’s Sumitomo Forestry partnered with Australian property investor Cedar Pacific to develop high-quality, sustainable build-to-rent assets in Australia and New Zealand, according to a statement. The partnership secured its first project on 50 Quay Street in Brisbane. It is part of the State of Queensland Treasury’s affordable BTR pilot program, where 50 percent of the apartments will be priced below market. The pair also has a development pipeline in Melbourne, Canberra, Brisbane and Auckland. “We are committed to expanding our sustainable development business globally, and this partnership with Cedar Pacific represents a significant step forward,” said  Yasuhiro Odagane, managing director of Sumitomo Forestry Australia.

Trending topics

Investors embrace real estate’s ‘ugly duckling’ 

Industrial outdoor storage (IOS) is getting increasing attention from institutional money, thanks to its adjacency to one of the most sought-after property sectors. Catalyst Investment Partners is the latest firm to benefit from growing investor demand, closing its second IOS fund at $186.9 million, above its $150 million target. Helping with the fundraising process was greater investor familiarity with IOS, which refers to land that is zoned for an industrial tenant that would have outdoor storage requirements, such as vehicles, equipment or containers.

“When we were raising capital for Fund I, we were doing a lot of explaining on what IOS really is; it was much more of an educational pitch,” Dan Haroun, Catalyst’s co-founder, told PERE. “This time around, the investors we spoke with really had good knowledge of what industrial outdoor storage was as an asset class.” In a blog post last year, data provider Green Street Advisors memorably referred to the property type as a “beautiful ugly duckling.”

A win for the Wharf

In London, investment bank Morgan Stanley has extended the lease on its 547,000-square-foot European headquarters, giving the beleaguered Canary Wharf district a much-needed good news story. The bank announced it would stay at 20 Bank Street until 2038, with EMEA chief operating officer Chris Beatty labeling the Wharf “a great place to work” and saying in a release the group was “pleased” to be extending its tenure in the district. Morgan Stanley was one of the first big, high-profile tenants to move into Canary Wharf in the early 1990s, which remains home to an additional three of the six largest global investment banks – JP Morgan, Citi and Barclays. Morgan Stanley and Barclays’ lease extensions counter the general direction of travel post-pandemic, as long-time Wharf tenants including HSBC, Moody’s and Clifford Chance have committed to leaving the Docklands district.

Members attending the PERE Network Europe Forum in London next week will hear from Shobi Khan, chief executive officer of the Canary Wharf Group, on how the future of the business district is being reimagined. He speaks with Jonathan Brasse, editor-in-chief of the real estate group at PEI, on April 16.

Data snapshot

Measuring AI’s impact on real estate demand

Artificial intelligence has many unknowns, but Oxford Economics has taken a crack at how it may impact the workplace, and as a result, real estate. Overall, the firm expects 9 percent of the current American workforce to be displaced by generative AI by 2032, and demand for space to be felt disproportionately by the office and life sciences sectors.

People

A trio of capital-raising hires

Not one but three senior capital raisers have gone public with career moves over the past week. Grant Berlin, who formerly held global fundraising roles at New York-based alternative investment firm Cerberus Capital Management and Toronto-based mega manager Brookfield, has joined GID Investment Advisers in the newly created position of global head of capital raising. Berlin’s hire rounds out GID’s senior capital-raising team, which the firm began building two years ago with the recruitment of Min Woo Kang as head of Asia-Pacific [read our coverage here].

Meanwhile, New York’s CBRE Investment Management announced the appointment of Scott Silverberg, previously head of strategic partnerships at Oxford Properties, as Americas head of client solutions in New York. Former AEW Capital Management executive Emily Margolis has joined Texas-based Affinius Capital (formerly known as USAA Real Estate and Square Mile Capital Management) as managing director in the firm’s global investors group.

Investor watch

Louisiana Teachers commits over $500m to real estate

The Teachers’ Retirement System of Louisiana set aside two big checks to real estate funds last week. In the larger of the two, TRSL approved a $400 million commitment to TA Realty Core Property Fund at its board meeting. A second commitment of $125 million went to Kayne Anderson Real Estate Partners VII, per an announcement. The TA Realty fund has $7.9 billion in gross asset value, per documents seen by PERE, and some 45 percent of its investments are in industrial. Since its inception, it has had an 8.2 percent total net return. Kayne Anderson’s fund has a target of $3 billion and invests in medical office, senior housing as well as student and multifamily housing.

This week’s investor meetings

Tuesday, April 9

Wednesday, April 10

Thursday, April 11

Friday, April 12

Today’s letter was prepared by Miriam Hall, with Evelyn Lee, Charlotte D’Souza, and Christie Ou contributing.