Blueprint: Blackstone’s latest single family investment, Brookfield’s new ESG head, PGIM’s big logistics buy

Blackstone backs a single-family rental specialist; PGIM makes a big logistics buy; Brookfield hires an ESG chief; the SEC opens the door to more investors; and more in today's briefing, exclusively for our valued subscribers.

He said it

“We can’t recover until people actually return to New York. That won’t happen until the people who work in our offices come back”

Related Companies chief executive Jeff Blau calls for New York workers to return to their offices in a Wall Street Journal op-ed (paywall)

What’s new?

Home sweet rental home

Frank Cohen

Blackstone is back in the single-family rental space. Sort of. Using its non-traded Blackstone Real Estate Income Trust, the New York-based mega manager led a syndicate of investors that bought $300 million of preferred equity shares in Tricon, a Toronto-based firm specializing in North American rental homes. For its $240 million investment, BREIT will own roughly 12 percent of the company on an as-converted basis and get a board seat. Tricon will use the cash to reduce its corporate debt.

A pioneer in the sector, Blackstone built its single-family portfolio into Invitation Homes, which it took public in 2017 to the tune of $1.5 billion. The firm sold its final shares of Invitation Homes last year and now owns no single-family rental homes. Yet, its willingness to back Tricon speaks to the strength of the US and Canadian rental home markets. Residential investors and managers should take note, especially as droves of white-collar workers exit New York, San Francisco and other gateway cities.

Delivering the goods

The industrial sector has not only survived but thrived during the covid-19 pandemic due to the continued rise of e-commerce and distribution demand. Last week, PGIM Real Estate became the latest US firm to capitalize on the opportunity by acquiring a 4.7 million-square-foot, eight-property logistics portfolio across several US markets for $425 million. The seller, Crow Holdings, pegs this as one of the largest industrial portfolio sales completed during the pandemic, a notable feat at a time when uncertainty around valuations has paused most other transaction activity.

Deepening the pool

Real estate managers will soon have a deeper pool of investors to draw from. The US Securities and Exchange Commission has opened the door for more individual investors to access real estate funds and other private market structures. Previously, individuals had to earn at least $200,000 a year or have at least $1 million of assets to be considered accredited investors. Under new SEC guidelines, professional credentials can be used to bypass wealth and income thresholds, meaning fund employees, financial advisors and other financial workers can get in on the action.

See our sister publication Regulatory Compliance Watch’s coverage of this topic here.

All about values

Our September cover story, “The covid-19 reporting challenge,” publishes today. The deep dive analysis – which we teased with this valuation podcast last week – will examine how the extreme uncertainty of the crisis has created extraordinary new challenges in performance measurement and reporting in private real estate, amid ongoing efforts to standardize globally. The cover story comprises five interconnected sub-stories representing the perspectives of key stakeholders, including: valuers, investors, managers, standard setters, as well as the specific difficulties of performance reporting in the Asia-Pacific region. Over the next two weeks, we will highlight the sub-stories – featuring high-profile industry players such as APG Asset Management, Florida State Board of Administration, Nuveen Real Estate and LaSalle Investment Management – in the following order:

  • September 1 – Introduction
  • September 2 – Valuers
  • September 3 – Investors
  • September 8 – Managers
  • September 9 – Standard setters
  • September 10 – Asia-Pacific

Data snapshot

Low flow

Capital flows into US real estate were significantly diminished during the first half of the year, according to a CBRE report.

Trending topics

Not-so-green giants

Data centers do not exactly tick the “green finance” box. They already draw around 1-3 percent of the world’s power and are expected to account for a whopping 20 percent by 2025, according to the brokerage Savills. So, it is no surprise they have drawn the ire of environmental regulators. The EU has called for data centers to be carbon neutral by the next decade, an edict that comes amid surging demand for digital services. Some developers are already incorporating renewable energy sources and sustainable building materials in their data centers, so expect more greening of this sector in the coming years – either by choice or government mandate.

In print

Check out our September issues

With the new month comes a fresh batch of PERE‘s print magazines, hot off the press. In our main edition, we tackle a topic on the minds of many: assessing property values and performance in the current environment. We deep dive into valuations, reporting standards and much more in this deeply investigated piece. You’ll also find insights into the US cities that are winning and losing in the covid era and an exploration of the distressed opportunities in hospitality.

In addition to our main magazine, we have a special edition that delves into the top factors determining where managers are domiciling their funds. Look for our keynote interview with RBC and a trio of roundtables exploring regulatory trends in the top global markets.

People moves

ESG expansion

Brookfield Asset Management has brought in an environmental heavy weight to bolster its focus on clean energy and sustainability. The $550 billion firm has hired Mark Carney as vice chair and head of Environmental, Social and Governance (ESG) and Impact Fund Investing. Previously, Carney served as governor of the Bank of England and the United Nations Special Envoy for Climate Action and Finance. At Brookfield he will oversee a variety of platforms that invest in low-emission buildings, produce renewable energy and finance other green investments.

Investor watch

Ontario Teachers offset losses

The Ontario Teachers’ Pension Plan took major losses during the first half of the year, much of them coming from its real assets portfolio. Real estate and infrastructure combined for a C$4.7 billion ($3.6 billion; €3 billion) decline during the first six months of the year, Jo Taylor, the pension’s chief executive disclosed last week. At C$41.6 billion, real estate and infrastructure account for one-fifth of the pension’s C$205 billion of assets. These and other losses were offset by a C$7.9 billion of income from bonds and other fixed income instruments. See Bloomberg’s coverage OTPP’s portfolio fluctuation here.

This week’s LP meetings

Tuesday, September 1

Wednesday, September 2

Thursday, September 3

Friday, September 4

Today’s letter was prepared by Kyle Campbell with Evelyn Lee, Arshiya Khullar, Eugenia Jimenez and Merle Crichton contributing

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