Blackstone Group Inc (NYSE: BX) announced the sale of its portfolio company BioMed Realty for $14.6 billion on Thursday, to a group led by existing BioMed investors. BioMed was acquired by Blackstone Real Estate Partners VIII L.P. and co-investors in 2016 and the sale represents a $6.5 billion gain.
The internal sale transaction from one fund to another is a part of Blackstone’s long term strategy to recapitalize the unit.
With an 11.3 million sq. ft portfolio, BioMed tops the leaderboard among private owners of life science office building in the U.S.
What Happened: BioMed investors were granted an option to accept a cash consideration or a reinvestment option as the fund owning the company eventually needs to exit all holdings and return money to investors.
BioMed investors opted to own the life sciences realty company instead of bailing out with the cash. The fund has agreed to sell BioMed to another Blackstone fund that can hold the company indefinitely.
Blackstone has sought consultation from independent advisors and also engaged Morgan Stanley (NYSE: MS) to solicit bids with higher offers.
BioMed President and CEO, Tim Schoen commented that the new capital structure would enable the company “to make concentrated investments in core markets to support the growth of the life science and technology industries.”
Why Does It Matter: This is Blackstone’s third-largest profit margin after the Hilton Hotels Worldwide Inc. and Equity Office Properties Trust deals, as per the Wall Street Journal.
Investor interest in the niche real estate segment is on the rise, primarily due to the rising research and development of new drugs and treatments by startups.
Price Action: BX shares gained 0.51% at Thursday’s close to $55.40. The stock rose by an additional 0.85% in after-hours.
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