It says a lot about the rise of alternative strategies within private real estate investment when this year’s PERE award for Europe Deal of the Year goes to a transaction in the so-called niche sector of student housing.
That deal was none other than Blackstone’s $6 billion acquisition of the iQ Student Accommodation platform – the UK’s second-largest student accommodation business – from Goldman Sachs Merchant Banking Division and the Wellcome Trust. It was the largest private real estate transaction ever in the UK, with iQ trading at a 40 percent premium to its net asset value.
Indeed, the deal was the only transaction among the Deal of the Year finalists that involved an alternative real estate sector. The other three candidates – APG Asset Management’s acquisition of a 50 percent interest in VIA Outlets from Hammerson for around €301 million; GLP’s purchase of Goodman Group’s Central and Eastern Europe portfolio for €1 billion; and The Valesco Group’s acquisition of the Finance Tower in Brussels for €1.2 billion – all focused on the traditional real estate sectors of retail, logistics and office, respectively, and had considerably smaller ticket sizes. With the iQ deal’s distinguishing scale and niche focus, Blackstone commanded 37 percent of votes in the category, compared with 31 percent for GLP, 17 percent for Valesco and 15 percent for APG.
The transaction also snagged the New York-based private equity giant the award for the Alternatives Investor of the Year. In this category, the firm faced some stiff competition from Greystar, which formed a €1 billion joint venture with Ivanhoé Cambridge and Bouwinvest Real Estate to develop student housing and co-living real estate in Paris and led a consortium of investors, including AXA IM Alts and CBRE Global Investors, to acquire a Spanish student accommodation business with 1,100 beds from Urbania.
Also in the running were Colony Capital, which acquired data center provider Etix Everywhere through portfolio company Vantage Data Centers as part of a $2 billion European expansion and purchased Next Generation Data in the UK, Europe’s largest data center campus; and AXA IM Alts, which completed the largest life sciences office deal in Europe when it purchased the Kadans Science Partner business in a deal valued at €500 million.
However, Blackstone ultimately prevailed over its competitors, winning 34 percent of votes, slightly ahead of Greystar’s 31 percent and far exceeding AXA IM Alts’ 18 percent and Colony’s 17 percent.
Other alternatives-related wins
Blackstone was not the only firm to win a PERE award in Europe for its activities in niche property sectors last year. Harrison Street, a Chicago-based manager well-known for its focus on alternative real estate strategies, was shortlisted and won in the UK Firm of the Year category in part because of its partnership with Trinity Investment to buy a 1.6 million-square-foot life sciences office portfolio in England and Scotland for £250 million ($341 million; €283 million).
Meanwhile, advising on niche property deals provided one of two reasons why Clifford Chance was a finalist and the ultimate winner for the Europe Law Firm of the Year – Transactions category, having represented Wellcome Trust in its joint sale with Goldman Sachs of iQ to Blackstone. The law firm’s work on AXA IM Alts’ €1.4 billion acquisition of a pan-European core logistics portfolio from AEW was the second reason for its shortlisting.
However, not all alternative strategies are considered the same in terms of their investment prospects, with some firms showing caution in sectors such as student accommodation.
“The pandemic has had a polarizing effect on Europe’s niche sectors,” LaSalle Investment Management noted in its 2021 Investment Strategy Annual. “For example, self-storage and healthcare have proven resilient, while the hotel and leisure sectors, and to a much lesser extent the student housing sector, have suffered due to government-imposed restrictions on movement.”
The firm added that there is no lack of supply of hotels, leisure properties and UK student housing: “Weak demand in 2020 has therefore been felt more keenly and thus values have fallen farther. These sectors are not facing the same existential threats as retail, although we do expect some lasting impact in 2021 due to the decline in international tourism, business travel and global student mobility.”
Smashing fundraising records – again
Blackstone was the biggest winner in Europe, picking up a total of six trophies – which also included Firm of the Year, Industry Figure of the Year, Capital Raise of the Year and Logistics Investor of the Year – out of 22 categories. The firm was trailed by Harrison Street, London-based real estate investment manager Tristan Capital Partners and Germany’s Allianz Real Estate, each with two wins.
Blackstone won five of its awards on the basis of two major achievements in 2020. The iQ transaction was one of those achievements. The $11.91 billion capital raise for Blackstone Real Estate Partners Europe VI, the largest-ever European real estate fund, was the other.
It would be remiss to not include Blackstone’s record-breaking fundraise for BREP Europe VI in a review of the biggest 2020 achievements in European private real estate. The firm’s equity haul dwarfed those of its rivals in the Capital Raise of the Year category, which included Angelo Gordon’s $1.5 billion fundraise for AG Europe Realty Fund III, exceeding its $1.2 billion target and hitting its hard-cap; BlackRock Real Assets’ final close for Europe Property Fund V at its €1.3 billion hard-cap; and NREP’s €2 billion NREP Nordic Strategies Fund IV, which surpassed its initial target of €1.25 billion. BREP Europe VI also was reportedly the primary vehicle through which Blackstone made its iQ purchase.
In fact, the BREP Europe VI fundraise was so large that it comfortably exceeded the $9.97 billion aggregate total for the rest of the top 10 largest Europe real estate fund closes in 2020, according to PERE data. The firm has had a historical track record of blowing away the regional fundraising competition, having raised the four largest European property funds of all time, including the $8.92 billion BREP Europe V in 2017, the $8.83 billion BREP Europe IV in 2014 and $4.47 billion BREP III in 2009, PERE data show.
Blackstone still had €7 billion left to invest out of BREP Europe VI’s approximately €9.8 billion in capital as of December 31, according to the firm’s FY 2020 earnings results. With so much equity left to deploy, Blackstone has many more headline-making BREP Europe VI deals to come.