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On Thursday, Blackstone announced that it has agreed to sell biotech real estate firm BioMed Realty for $14.6 billion to a group of existing BioMed investors.

BioMed is the largest private owner of life science office buildings in the United States with an 11.3 million square foot portfolio concentrated in leading innovation markets including Boston/Cambridge, San Francisco, San Diego, Seattle and Cambridge U.K.

BioMed also maintains a premier development platform with 2.3 million square feet of Class A properties in active construction to meet projected life science industry demand.

In connection with the recapitalization, existing BioMed investors were offered the option to exit for cash or reinvest proceeds from the sale. The investment will generate $6.5 billion of cumulative profits for Blackstone’s BREP VIII fund and BioMed co-investors.

Back in the day

BREP VIII, an opportunistic Real Estate investment fund, and co-investors acquired BioMed, then a publicly traded REIT, for $8 billion in cash in January 2016.

When the acquisition was originally announced in October 2015, BioMed’s then-President and CEO Alan D. Gold said, “Demand for high-quality, institutional real estate to support the unprecedented growth of the life science industry is at historic levels as demand is outpacing supply in all of our core innovation districts. However, we believe that the public markets are not adequately valuing our assets and proven business model. Entering into this transaction with Blackstone fulfills our Board of Directors’ mission to maximize stockholder value.”

For its part, Blackstone touted its belief in its long-term fundamentals of the sector, particularly in locations with top-tier educational and research institutions.

Since taking BioMed private, Blackstone has 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.

Still bullish

Kathleen McCarthy, Global Co-Head of Blackstone Real Estate, said, “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. 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.”

Nadeem Meghji, Head of Real Estate Americas for Blackstone, said, “We have worked hand in hand with the world-class BioMed team to build the largest private life science office portfolio in the U.S. located in the best markets. 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. 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.”

Tim Schoen, President and CEO of BioMed Realty, said, “Together with Blackstone, we have created a coveted portfolio in one of the most sought-after real estate asset classes. 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.”

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