This month PERE decided to return to publishing special reports on real estate secondaries after a five-year hiatus – a reflection of the rapid growth of this market.
No longer the exclusive domain of private equity specialists, real estate secondaries are a hive of activity – a description that lends itself particularly well to the manager-led transactions that dominate the sub-asset class.
After all, so far this year we are seeing the largest private real estate deal in history – at a modest €21 billion – and it is a recapitalization. Blackstone is recapitalizing last-mile logistics business Mileway in a strong sign of confidence not just in the logistics sector, but in its investors, too. Investors could retain or increase their interest, or cash out, and Blackstone said the “large majority” of capital in the transaction is coming from its existing investors.
While the Mileway deal sits in a league of its own in terms of size, it is something of a flag bearer for a trend gathering steam in the real estate space. GP-led deals have grown by 38 percent on an annualized basis in the past five years, according to data from Landmark Partners and adviser Greenhill.
GP-led deals can take many forms, and there are myriad reasons why we are seeing more of them. Managers may be looking for liquidity or fresh capital, or to attract strategic investors. GP-leds are no longer reserved for failing assets, and this applies to real estate assets as much as private equity ones.
What about the investor in all of this? Secondaries experts PERE has spoken to for its report are unanimous that parties on both sides of the table need to achieve their strategic goals in a GP-led. Fairness and transparency are critical to the success of a recapitalization, regardless of the incoming regulatory push from the US Securities and Exchange Commission, which proposes changes to how GP-leds could be conducted.
Excitement is clearly palpable for GP-leds in real estate, but let’s not consign LP-led transactions to the history books just yet. As one commentator puts it: “One is not necessarily better than the other. It is a question of what you are trying to achieve.”