Private equity’s high-conviction thematic trade in U.S. biotech real estate continues to generate heat. On Wednesday, Boston-based private life science real estate developer King Street Properties announced a strategic partnership with Brookfield Asset Management, the alternative investments giant that manages $625 billion in client assets globally, to invest in life science real estate across the United States.
The partnership will invest some $1.5 billion in equity capital toward King Street’s existing life science real estate pipeline, and Brookfield has agreed to buy an interest in King Street’s operating platform. King Street will continue to own and operate its existing portfolio of 2.5 million square feet of stabilized assets and 2.3 million square feet of assets under development.
King Street says partnering with Brookfield represents a “growth strategy” for the firm, enabling it to scale its platform into new regional U.S. markets, and expand into new biotech markets like biomanufacturing.
“The potential in the life science real estate market has never been greater, and the new Brookfield/King Street combination will allow us to match the expertise we have acquired over 20 years in the sector with Brookfield’s substantial financial resources and reach,” said King Street Properties principal and founder Thomas Ragno, in a statement on the partnership.
“Life science is an attractive investment sector given the long-term market dynamics of an aging population and increased public and private funding to R&D,” said Lowell Baron, Managing Partner and Chief Investment Officer of Brookfield’s Real Estate Group. “King Street’s team is best-in-class and their market leadership in areas like biomanufacturing is a differentiator that we believe positions them for continued growth.”
KKR-Cornerstone
Also on Wednesday, private equity giant KKR announced a joint venture with healthcare real estate investor Cornerstone to acquire and develop a portfolio of diversified healthcare and biotech properties across the United States. KKR and Cornerstone have seeded the portfolio by recapitalizing 25 healthcare properties currently owned by Cornerstone. With funding commitments provided by KKR’s real estate and credit funds and Cornerstone, the JV positioned to acquire more than $1 billion in real estate assets over the next few years.
The portfolio recapitalized by KKR and Cornerstone includes 713,705 square feet of medical office buildings and ambulatory surgery centers in 12 states, with in place long-term leases to a high quality group of healthcare systems, physician group practices and surgery center operators. Cornerstone and KKR will work together to grow the portfolio through acquisitions and net lease development opportunities, with a focus primarily on long-term leased single-tenant medical office buildings, ambulatory surgery centers and facility-based outpatient healthcare assets.
“KKR is one of the world’s largest investment firms with incredible connectivity across industries, including deep experience investing in the healthcare and real estate sectors,” said Cornerstone President and CEO Tag Birge. “This strategic partnership significantly increases our reach and capacity to deliver investment and development solutions for leading physician groups and health systems. We are very excited to work with a partner in KKR who shares our commitment to lasting client relationships and strong focus on portfolio construction and underwriting.”
“We will contribute capabilities from across KKR’s real estate, credit and healthcare industry teams to support sourcing and underwriting of assets for the Joint Venture,” said KKR Director Michelle Hour. “As investors in the healthcare sector for more than two decades, our relationships and understanding of the needs of tenants will help us to provide attractive ownership for their mission-critical real estate.”
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