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What to expect from EQT Exeter’s merger with BPEA Real Estate

Aligned with EQT Exeter’s global strategy, the combined platform is expected to start raising sector-specific vehicles upon the completion of the merger.

The acquisition of Asia’s BPEA Real Estate will mark the third leg of global expansion for EQT Exeter, the real estate arm of the Stockholm-based private equity firm EQT. The two property businesses will be combined as part of EQT’s €6.8 billion purchase of Hong Kong-based private equity firm Baring Private Equity Asia.

Ward Fitzgerald, chief executive officer and senior managing principal of EQT Exeter, told PERE that the transaction will allow the platform to expand into the multifamily, life sciences and office sectors in Asia. “We will be able to expand our business to parallel our businesses in the United States and Europe, where we’re very strong in all three areas,” he said. Despite having 80 percent of its AUM in the industrial sector, the firm also has a multifamily platform and an office fund series in the US.

Similarly, Fitzgerald expects the new platform to start raising sector-specific vehicles in Asia upon the completion of the merger. “Our capital raising and investor relations teams would be working with us to form vehicles around those three themes,” he said. “We’re active now in speaking with prospective clients and partners in Asia across all three sectors.” Fitzgerald expected the formation of the new products would occur over the next six to 12 months.

EQT Exeter only had logistics exposure in Asia before joining forces with BPEA Real Estate. The former first ventured into Asia real estate in 2021 when it launched its $200 million debut logistics fund with a focus on China. The firm then acquired Tokyo-headquartered value-add logistics investment manager Bear Logi in January this year.

That logistics exposure is expected to increase significantly with the acquisition of BPEA Real Estate, which is slated to close in Q4 2022. This is particularly the case in China, where BPEA Real Estate has a sizable presence with its warehouse platform, Forest Logistics. In October, BPEA Real Estate raised $1.2 billion of equity for Forest Logistics and is expected to deploy the capital to build a portfolio of more than 30 modern logistics assets.

Integration

Mark Fogle, head of real estate at BPEA, will lead the growth of the combined entity and the integration of the two teams in Asia. He expects it would be a “smooth transition” given both BPEA Real Estate and EQT-Exeter have existing strategies focused on the logistics sector.

However, with $1.5 billion of AUM in Asia across different geographies and sectors, BPEA Real Estate will extend EQT Exeter’s offerings beyond logistics in Asia. “We will also continue to focus on our existing sectors where EQT-Exeter has not invested previously in Asia, such as residential, office and hospitality” Fogle said.

Growing BPEA’s property platform has always been front of mind for Fogle, who was approached by Jean Eric Salata, the firm’s founder and chief executive officer, to launch the its real estate platform in 2011. With over 30 years of real estate experience, Fogle believes scale will become increasingly important as the private equity real estate industry undergoes consolidation.

Prior to agreeing to an M&A deal with EQT, BPEA had considered both an IPO and growing its platform organically, he said. But by “partnering and being a part of EQT-Exeter will accelerate our ability to get where we want to be,” he explained. “Ward has built an amazing company in North America and more recently in Europe and I am truly excited about the partnership of our two platforms.”

Apart from the three key sectors that Fitzgerald identified for expansion in Asia, the combined platform will not shy away from other real estate sectors where BPEA Real Estate has extensive exposure, according to Fogle.

As the merger is not expected to close until the end of 2022, the successor vehicle to BPEA Real Estate’s $1 billion Fund II will likely be launched under its existing brand. Since its launch in 2011, the platform has raised two regional opportunistic funds, closing BPEA Real Estate Fund I and II on $365 million in 2014 and $1 billion in 2018 respectively.

“We are substantially invested in Fund II, and we intend to continue with exactly the same strategy for Fund III, and led by the same team,” said Fogle. PERE understands that the $1 billion BPEA Real Estate Fund II is close to being 70 percent deployed.

EQT launched its real estate platform with the hires of Edouard Fernandez and Rob Rackind in 2015 and went on to raise two funds, the €400 million EQT Real Estate I and €1 billion EQT Real Estate II, in 2017 and 2020 respectively. Exeter Property Group, which was founded in 2006 and led by Fitzgerald, was acquired by EQT in 2021.

Timeline

2011 Mark Fogle joins BPEA to start its real estate platform

2014 BPEA closes BPEA Real Estate Fund I on $365 million

2015  Edouard Fernandez and Rob Rackind join EQT to launch its real estate platform

2017 EQT closes first real estate fund, EQT Real Estate I, on €400 million

2018 BPEA closes BPEA Real Estate Fund II on $1 billion

2019 BPEA raises $1.2 billion for its China logistics platform, Forest Logistics

2020 EQT closes EQT Real Estate II on €1 billion

April 2021 EQT acquires Exeter Property Group for $1.87 billion

July 2021 EQT Exeter launches $200 million debut vehicle in Asia with a focus on China logistics

January 2022 EQT Exeter buys Tokyo-headquartered value-add logistics investment manager Bear Logi

March 2022 EQT enters into an agreement to acquire BPEA

Q4 2022 EQT’s acquisition of BPEA scheduled to complete