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Blackstone bets big on life-science buildings with $14.6B deal

Investor interest has intensified as researchers pursue a Covid-19 vaccine

Blackstone’s Kathleen McCarthy with 440 Saw Mill River Road, Ardsley, New York and 1000 Gateway Boulevard in San Francisco, California (left) (Blackstone; BioMed Realty)
Blackstone’s Kathleen McCarthy with 440 Saw Mill River Road, Ardsley, New York and 1000 Gateway Boulevard in San Francisco, California (left) (Blackstone; BioMed Realty)

Blackstone Group sold a portfolio of 93 life-science buildings to a separate fund the asset manager controls for $14.6 billion, in a transaction that represents a $6.5 billion gain in value from when it acquired the properties in 2016.

The New York-based commercial real estate behemoth said that rather than cash out of the BioMed Realty Trust holdings, which is the second-largest owner of life science buildings in the U.S., it sold it to a subsidiary because investors wanted to stay in, the Wall Street Journal reported.

Blackstone’s profit in the sale is the third-largest it has achieved in any fund it manages. Prior to the transaction, which is the first of its kind Blackstone has carried out, the firm considered taking BioMed public or selling the company.

BioMed’s properties are concentrated in the San Francisco Bay Area, San Diego, Boston, Seattle and New York, as well as Cambridge in the United Kingdom, according to its website. Investment bank Morgan Stanley will also seek bids to determine if a higher offer exists.

The demand for life-science buildings has intensified, especially as new treatments are developed by startups instead of at large pharmaceutical companies. The existing demand for space intensified with the onset of Covid-19, as researchers work to develop a vaccine.

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Kathleen McCarthy, Blackstone’s global co-head of real estate, said that the BioMed life sciences portfolio has not suffered the drops in rent collections that have plagued other sectors. The portfolio’s occupancy stands at 97 percent, McCarthy told the Journal, and about half of its tenants are working on Covid-19 testing or vaccines.

Although the sector does face risks of high maintenance costs for labs, and there can be a significant lag time between research and selling treatments to the public, other investors are bullish on life sciences, too.

In San Francisco, Ventas, a publicly-traded healthcare REIT based in Chicago, acquired a life-sciences campus from Bain Capital Real Estate for $1.02 billion. Bain acquired the Genesis South San Francisco campus in 2015.

“Strong and growing capital flows into the life science sector are accelerating innovation and discovery,” said Ventas CEO Debra Cafaro.

[WSJ] — Georgia Kromrei

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Blackstone GroupCommercial Real Estate