By Jon Peterson
The life science sector has been the darling of the commercial real estate industry over the last eighteen months, and that will most likely continue into the future. One indication of its importance in the industry can be seen through the level of institutional investment made across the sector, and when the biggest pension fund in the world makes a significant investment into that area, it will be noticed.
In recently published board meeting documents, the California Public Employees Retirement System, CalPERS, has approved an $800 million commitment into the Blackstone BioMed Life Science Real Estate Limited Partnership, the pension fund stated but would not comment beyond the information provided in the board meeting document.
Blackstone Real Estate also declined to comment when contacted for this story.
At the end of last year, the commingled fund had 41 percent of its portfolio allocated in properties along the West Coast. This was split between 19 percent in the San Francisco/Bay Area market, 17 percent of the fund went across the properties in San Diego and another 5 percent of the asset funds were in Seattle. The rest of the portfolio was allocated in the Boston/Cambridge area, which accounted for roughly 54 percent of the portfolio, while the remaining 5 percent is represented by properties in Cambridge, United Kingdom.
The operating portfolio in the Blackstone BioMed Fund stood at 11 million square feet during the same time period. There was a total of 80 assets in the fund, and it represented no less than 80 percent of BioMed’s total portfolio value. This portfolio is at least 95 percent occupied with 75 percent of the occupants represented by investment-grade tenants. The average remaining lease term across the portfolio at this time was seven years.
The investment plan for the commingled fund going forward is to both acquire existing assets and pursue new development opportunities. It is considered to be a core plus fund, and it will consider investments that can deliver net IRRs of 12 percent. The fund has an open-ended investment structure, which means it is always looking to attract new commitments. It does require an initial four-year lockup period for any new investor.
CalPERS considered the commitment into the Blackstone BioMed fund a follow-on investment with Blackstone. The pension fund had previously investment with Blackstone in its core-plus open-ended fund Blackstone Property Partners. CalPERS has placed a value on its investment of this fund at $808 million, as stated by the pension fund in a public document.
CalPERS typically does not issue a great deal of commingled fund commitments. Most of the pension fund’s real estate investments are accomplished through separate account partnerships. Up to 75 percent of its investments are in stabilized core types of assets.