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Blackstone’s Mileway deal shows lines blurring in RE secondaries

The €21bn transaction is the second large recap the firm has done in five months that utilised little or no secondaries capital.

A recent recapitalisation by Blackstone shows a trend of large managers creating liquidity without relying on secondaries capital.

Last week, the top-ranked general partner in the PEI 300 completed a €21 billion recap of European last-mile logistics company Mileway, the largest private real estate transaction of all time, according to a statement.

The Blackstone’s Core+ real estate strategy, which is designed to hold assets in perpetuity, participated in the recap alongside existing Mileway investors, who were given the option to cash out, retain or increase their holdings. Most LPs rolled with the asset, according to a spokesman for the firm.

The deal is subject to an open go-shop process, which will be led by Morgan Stanley and last for 75 days. The process is an additional mechanism to show Blackstone sought the highest price, according to a senior European intermediary, adding that the few firms that could do a deal of such size likely already got their chance.

The deal did not include follow-on capital, Secondaries Investor understands. The asset was originally held by Blackstone close-ended funds.

It follows in the footsteps of a €14 billion process in 2020 involving life sciences real estate business BioMed Realty. In that deal, Blackstone Real Estate Partners VIII and co-investors sold the business into a continuation fund largely backed by the same investors.

Blackstone isn’t the only firm creating its own liquidity. In mid-February, Secondaries Investor reported on a $3 billion deal in which Global Infrastructure Partners moved ports operator TIL Group into a continuation fund. The deal, advised on by Campbell Lutyens, was digested entirely by existing investors rolling with the same or enlarged positions, with no secondaries capital required.

To be or not to be (a continuation vehicle)

These assets were viewed as winners in an asset class defined by long-term horizons. Real estate secondaries has a way to go to catch up to private equity in terms of investor education and comfort, though once that happens, the addressable market could explode, according to a senior Boston-based intermediary.

These specific types of transactions resonate with GPs and LPs across the size spectrum, he added.

Such deals raise the question of whether a fund restructuring process that doesn’t involve secondaries capital is a secondaries process. Taken in totality, the €21 billion represented by the Mileway recap would account for more than a third of 2020’s total secondaries deal volume, based on estimates by Greenhill.

Real estate and infra/real asset secondaries accounted for a combined 11 percent of the secondaries volume in 2021, according to Greenhill’s year-end report, just $14.75 billion.

Real estate secondaries buyers and advisers whom SI has spoken with concur that there is an evolving understanding when it comes to what should or should not count as a secondaries transaction, and as a result the addressable universe for such transactions is potentially much larger than the numbers suggest.

– Rod James contributed to this report.