Blueprint: Lone Star’s UK student housing play, ESR sidesteps into data centers, AXA’s office development fundraise, Ivanhoé Cambridge’s US industrial bet

Private real estate firms jostle for UK student housing market share; ESR’s ‘natural’ pivot to data centers; PAG secures rare mega office lease in Hong Kong; Hotel fundraising; and more in today's briefing, exclusively for our valued subscribers.

He said it

“For every 100 employees, we may need seats for only 60 on average…this will significantly reduce our need for real estate.”

JPMorgan’s chief executive officer Jamie Dimon told shareholders in a letter last week as he indicated that up to 10 percent of the investment bank’s workforce could soon be working permanently from home.

What’s new?

PERE firms pile into UK student housing
Call it the Blackstone effect. After the New York-based private equity giant acquired the iQ Student Accommodation platform last year in the largest-ever UK private real estate transaction, a number of private equity real estate firms have also gotten in on the UK student housing action. Lone Star Funds is the latest, having purchased 2,621 beds in Cardiff, Hatfield, Swansea and Sheffield for £315 million ($433 million; €363 million) through its Lone Star Value-Add Fund I. Other new entrants in the UK sector include Ares Management, which bought two newly-built student accommodation assets comprising 1,359 beds in Exeter and Cardiff in February, and Patron Capital Partners, which announced last month a joint venture with Curation Capital to acquire and refurbish student properties in towns and cities associated with Russell Group or tier-one universities.

ESR makes natural pivot to data centers
Hong Kong headquartered-ESR is the latest logistics firm to extend its reach from warehouses to data centers. The $30 billion firm made its first investment in the sector acquiring an asset in Japan’s Osaka expected to have a potential gross asset value of $2.15 billion. For logistics managers, venturing into the data center sector seems a natural extension of their existing business. For ESR, the firm believes its data center platform will “interconnect businesses and individuals in the digital economy” and support the growth of its customers. Besides ESR, Singapore-headquartered GLP is another logistics powerhouse to have forayed into data center investment. Led by former head of Alibaba’s internet data center department Xiazhou Zhao, GLP’s data center platform had five development projects and a team of 200 people as of September 2020.

PAG scores Hong Kong mega lease
Hong Kong’s battered office market may be showing signs of revival. Last week, Manulife Hong Kong signed a lease agreement with manager PAG for approximately 145,000 square feet of office space at the International Trade Tower. Manulife will be one of the anchor tenants in the office tower, occupying four floors. This is the largest Grade A office leasing deal signed in Hong Kong in the past 20 months. It will be seen by industry watchers as a vote of confidence in a city marred by a range of issues, including political unrest and the covid-19 outbreak. 2020 was its worst year in terms of office leasing momentum since 2001, with annual net absorption at -1.7 million square feet, according to research by property services firm Colliers.

AXA bets on the new in post-covid office tussle
If there is one institutional investor that missed the memo about how working from home policies among corporates post-lockdowns might impact offices, it is AXA IM Alts. The Paris-headquartered manager is going full-pelt on another iteration of its office development strategy, raising nigh on €800 million in a ‘first closing period’ for its ‘fifth generation development strategy’. The firm has taken the view that asset quality will be the prevailing factor as offices grapple for occupiers after the pandemic subsides. In an announcement on the capital raising, the investor said it “believes that the covid-19 pandemic has already led to further polarization in favor of prime new offices that meet occupiers’ requirements for high quality, flexible office space aligned with future working habits at the expense of older stock where functional obsolescence will be accelerated.”

Data snapshot

CMBS flies at half mast
Commercial real estate mortgage originations were impacted drastically due to the volatility in 2020. CMBS originators took up only 8 percent of the overall financing market last year, a steep drop from the average 16 percent share in the previous two years, according to Real Capital Analytics.

Trending topics

CBRE M&A Activity
The ongoing market dislocation has buoyed M&A activity across the world. According to property services firm CBRE, corporate merger and acquisitions reached $2.2 trillion in H2 2020, making it the highest half-year on record. The rebound in investment activity towards the latter half of the year, after the initial shock of the pandemic was absorbed by financial markets, continued into 2021 in both debt and equity deals. While much of the M&A activity was led by the resumption of demand in the technology, media and communications sectors, there were also growing numbers of take-private REIT transactions. With many REIT prices yet to bounce back to pre-covid levels, especially in retail, hotel and office sectors, CBRE believes opportunities to acquire “oversold REITs” will further increase M&A activity in the real estate sector.

You ask, we deliver
After our hotel distress story was published online last week, multiple readers contacted us with requests for more details on the 23 hotel funds we mentioned in our piece. In response to these requests, we put together this data snapshot on the hotel funds, including the fund names, fund managers, amount of capital targeted and raised, fund strategies and regional focuses. If there are any other topics you would like to see us cover relating to the hotel sector or otherwise, please email PERE editor with your thoughts.

Investor watch

Ivanhoé Cambridge boosts US industrial exposure
Despite the heated race for logistics assets globally, Canadian investor Ivanhoé Cambridge has not only continued to believe in warehouses, but is making a further push into the sector by signing a number of industrial transactions across the regions since the beginning of 2021. Last week, it formed a $2 billion platform with US data center developer GID to invest in the urban infill industrial sector in the country. This came shortly after the investor acquired a development project in the UK with the country’s logistics specialist PLP in March and participated in a $400 million Japanese logistics joint venture with PAG in January.

This week’s investor meetings
Monday, April 12

Tuesday, April 13

Wednesday, April 14

Thursday, 15 April

Friday, 16 April

Today’s letter was prepared by Jonathan Brasse with Evelyn LeeArshiya Khullar and Christie Ou contributing.

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