A Blackstone fund has agreed to sell BioMed Realty for a whopping $14.6 billion to another Blackstone fund led by existing BioMed investors, as the pursuit for a COVID-19 vaccine accelerates the growth of the global life sciences sector and its demand for real estate.
The fund that owns BioMed will eventually need to exit all holdings and return money to investors, but the fund investors said they wanted to continue owning BioMed, leading the fund to sell it to another Blackstone fund that can hold the company indefinitely and allow investors to stay in, instead of cashing out, a source close to the deal told Fastinform.
The recapitalization is part of a “new long-term, perpetual capital, core+ return strategy” managed by Blackstone, the New York-based private equity firm said Thursday, adding that current BioMed investors were offered the option to exit for cash or reinvest proceeds from the sale. The investment will create a $6.5 billion gain in value for Blackstone’s BREP VIII fund and BioMed co-investors.
“Life science is one of Blackstone’s highest conviction themes, and we have made a number of important investments in this space across the firm,” Global Co-Head of Blackstone Real Estate Kathleen McCarthy said.
“In real estate, many of our investors are eager to maintain or increase their exposure to life science office, and this recapitalization enables them to do that with an extraordinarily high-quality company as well as a trusted partner in Blackstone,” McCarthy said.
Since acquiring BioMed for around $8 billion four years ago, Blackstone said it concentrated its portfolio in core life science markets “with strong growth potential, building a best-in-class management team, developing assets for investment grade tenants and stabilizing operations by increasing occupancy.”
BioMed is currently the largest private owner of life science office buildings in the U.S., holding an 11.3 million-square-foot portfolio across Boston, San Francisco, San Diego and Seattle, as well as Cambridge, England.
“During our ownership, we have completed and commenced $3.3 billion of best-in-class new developments and continue to cultivate an attractive future development pipeline,” Head of Real Estate Americas for Blackstone Nadeem Meghji said. “We are big believers in the life science sector broadly and BioMed in particular, and we look forward to continuing to grow the business over the long term.”
Blackstone is not the only one betting big in the life science real estate sector to capitalize on demand amid the global pandemic. In April, Brookfield Asset Management acquired a 50% stake in a 700-acre life sciences campus near the University of Oxford in the U.K. and Alexandria Real Estate Equities, a major American life-science-focused real estate investment trust, said it raised $1.1 billion through a share offering in July.
“Together with Blackstone, we have created a coveted portfolio in one of the most sought-after real estate asset classes,” President and CEO of BioMed Realty Tim Schoen said. “Our sector continues to prove its resiliency, and now is the logical time to seek long-term capital.”
“This partnership structure and Blackstone’s ongoing support enable us to advance our mission, which is to make concentrated investments in core markets to support the growth of the life science and technology industries,” Schoen added.
Blackstone noted that Morgan Stanley provided a “fairness opinion” to BREP VIII on the transaction, and that it will be starting a “go-shop” process on behalf of BioMed’s current investors, which will be led by Morgan Stanley. The recapitalization is expected to close within five business days after the process concludes.
Morgan Stanley is serving as the financial advisor to BREP VIII, and Eastdil Secured is serving as the financial advisor to the purchasers, while Simpson Thacher & Bartlett is serving as the legal advisor to Blackstone.