North America awards: Niche sectors driving mega dealflows

The life sciences sector was catapulted from the sidelines into the mainstream in 2020. Buoyed by the pandemic-triggered tailwinds benefiting the property type, several real estate institutional investors began amplifying their exposure to life science office assets in big innovation markets in the US.

New York-headquartered asset manager Blackstone’s strides in the sector have been unparalleled so far, helping the firm sweep the North America regional awards, with a total of six wins. Nadeem Meghji, the firm’s senior managing director and head of real estate for Americas, has been awarded the Industry Figure of the Year award for leading the charge on some bold, path-breaking transactions in an otherwise tumultuous year for global financial markets.

The highlight transaction among them was Blackstone’s $14.6 billion recapitalization of BioMed Realty Trust, its mega life sciences platform, in October. The firm’s opportunistic Blackstone Real Estate Partners VIII fund and co-investors sold Biomed – pegged as the largest private owner of life sciences office buildings in the US, with a 11.3 million-square-foot portfolio – to Blackstone’s newly-created long-term, perpetual capital, core-plus vehicle, and ended up delivering a $6.5 billion profit to investors.

Meghji and his team’s high conviction bet has helped put a stamp of approval on the sector, pushing more institutional investors to capitalize on the structural and resilient nature of life sciences assets. According to property services firm CBRE, sales of lab/R&D properties in the US totaled $9.6 billion during the year ending Q2 2020, effectively a ninefold increase from the year ending Q2 2001.

The record-breaking BioMed transaction, which was also the biggest private real estate deal of 2020, has also won the North America Deal of the Year award after bagging 38 percent of the total votes. California-based Prologis’ $13 billion acquisition of Liberty Property Trust, the largest industrial property deal of last year, came second with 22 percent of the vote, only marginally ahead of the 21 percent received by USAA for its management buyout.

Adapting to the new normal

However, Prologis’s mega industrial deal did help the firm bag the Logistics Investor of the Year award, securing 43 percent of the total votes. The acquisition, completed in February, gave the firm control of 108 million square feet of logistics space, and expanded its presence in a number of key logistics markets, including Chicago and
Houston.

While 2020 was a challenging fundraising year overall, given constraints around roadshows and tapping new investors, opportunistic and debt-focused managers running long-established established fund series with a good track record remained successful in achieving mega closes. Fundraising for private real estate funds last year totaled $110.7 billion, of which approximately 48 percent was raised for opportunistic and mezzanine/debt vehicles, according to PERE’s 2020 fundraising report.

Leading the chart was Blackstone’s record $8 billion capital raise for Blackstone Real Estate Debt Strategies IV, which has also won the Capital Raise of the Year award. In addition, the firm has also won the Debt Firm of the Year category, beating other headline-grabbing capital raising efforts by Kayne Anderson and Brookfield Asset Management, who came second and third, respectively. Blackstone’s Real Estate Debt Strategies IV is also the second-largest vehicle raised globally, and across strategies, in 2020, according to PERE data.

The unprecedented market dislocation caused by the pandemic has driven a surge in investor demand for credit-focused strategies, which was evident post March. Blackstone’s $8 billion fund, which closed in September, is the largest property credit vehicle ever raised. And as much as $5 billion of this capital is understood to have been committed after the end of Q1 2020.

In a year where mainstream property sectors such as office, retail and hotels suffered major headwinds, several regional award wins have been bagged by firms that took large bets on covid-resilient sectors such as logistics, and various living strategies. Blackstone’s Firm of the Year win, for example, is also attributable to two other trend-defining transactions alongside BioMed: its $1.65 billion joint venture with Hudson Pacific to co-own and manage a 2.2 million-square-foot portfolio of studios and offices in the US and the rights to build 1.1 million square feet more; and the purchase of Simply Self Storage, a US self-storage company, from Brookfield Asset Management for $1.2 billion.

Brookfield, which came second in the Firm of the Year category, also ventured into new sectors last year, including committing $500 million to a net-lease platform, acquiring a single-family rental company for $300 million and launching a real estate secondaries platform.

Chicago-based investment management firm Harrison Street’s sweeping win of the Alternatives Investor of the Year category, with 51 percent of the votes, beating firms like Blackstone and Mapletree, is largely due to its strides in the residential sector. Last year, the firm raised $1.5 billion in capital for funds targeting student housing, senior housing, healthcare and other niche investments, in addition to extending a syndicated line of credit on a student housing portfolio to $700 million.

Law firm Kirkland & Ellis’ work in the industrial and other digital economy sectors has also helped it bag both the Law Firm of the Year awards – for transactions as well as fundraising. The Chicago-based firm advised logistics giant GLP on the formation of its fourth North American logistics fund, targeting $2 billion, and also helped to close San Francisco-based private investment firm GI Partners’ debut Data Infrastructure Fund on $1.8 billion. On the transactions front, it represented private equity giant KKR on $2 billion of transactions, including refinancing its US industrial property business, Alpha Industrial Properties, with $894 million of new debt.