Blackstone Raises Wager on Life Sciences With $3.5 Billion Property Deal
December 14 2020 - 08:29AM
Dow Jones News
By Peter Grant
Blackstone Group Inc. is amping up its bet on biotechnology lab
space and other life-sciences real estate, agreeing to pay $3.45
billion for a portfolio of buildings primarily in the active
Cambridge, Mass., market.
The acquisition is the latest sign of growing investor interest
in life-sciences real estate during the pandemic. Blackstone was
already one of the world's leading investors in this type of
property even before the Covid-19 outbreak.
Now the firm's interest is intensifying. Earlier this fall,
Blackstone recapitalized BioMed Realty, the largest private U.S.
owner of life-sciences property, for $14.6 billion. The firm is
also close to acquiring another two life-science buildings in the
Boston-Cambridge market for $1 billion, according to people
familiar with the matter.
"The pandemic has only amplified the need for vital drug
discovery and shined a light on the importance of innovation in
life sciences," said Nadeem Meghji, Blackstone's head of real
estate for the Americas.
Blackstone is one of the world's largest real-estate investors
with $341 billion of assets under management. Mr. Meghji said life
science is one of the firm's "high-conviction" bets -- property
types Blackstone believes are among the biggest beneficiaries of
emerging macroeconomic trends.
The firm also has been making big investments in industrial
properties, which have gained in value as distribution hubs for
booming e-commerce, and in Hollywood studios and offices driven by
new content creation.
The portfolio of lab buildings, which Blackstone is buying from
Brookfield Asset Management, consists of 2.3 million square feet of
space. Most is on a 30-acre campus adjacent to the Massachusetts
Institute of Technology. More than 95% of the portfolio is leased
thanks to strong demand from pharmaceutical and other life-sciences
companies that want to be close to the school's students, faculty
and research activities, Blackstone said.
The life-sciences sector has been one of the few bright spots in
the commercial real-estate industry this year. Many other property
types, like hotels and malls, have been hammered hard by the
pandemic, which has discouraged shopping and travel.
Most office space has been hurt by the enormous number of
businesses that are allowing most of their employees to work from
home. But life-sciences businesses have a harder time doing that
because lab work requires specialized designs, ventilation and
other infrastructure.
"You can't create a new drug from your living room or kitchen,"
Mr. Meghji said. "You need to be in physical lab space."
Blackstone's life-sciences bet still has risk. The strong demand
for life-sciences space this year has driven up prices to near peak
levels. There is also the danger of new supply saturating the
market.
The firm is betting it can mitigate that risk by investing in
top markets like Cambridge, where it is more difficult to develop
new lab space. "We've really been prioritizing the top biotech
clusters where you have the greatest depth of demand and talent,"
Mr. Meghji said.
Blackstone also has been a big investor in life-sciences
companies this year. In July, the firm raised a $5 billion
life-sciences private fund and in August, it invested $275 million
in Cryoport Inc., a temperature-controlled-logistics business.
"This is a very long-term trend for us that will persist far
beyond the end of the pandemic," Mr. Meghji said.
Write to Peter Grant at peter.grant@wsj.com
(END) Dow Jones Newswires
December 14, 2020 08:14 ET (13:14 GMT)
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