Large single-asset continuation fund transactions that have closed recently are the exception to the rule, a conference has heard.
Panellists at PEI Group’s Women in Private Markets Summit in London last week mused on Blackstone’s completion of a €21 billion recap of European last-mile logistics company Mileway in February. 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, a spokesperson told Secondaries Investor at the time. The asset was originally held by Blackstone close-ended funds.
That transaction followed 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.
Both Janice Ince, managing director at Pantheon, and Anne Gales, co-founder of placement agent Threadmark, noted at last week’s Summit that they had seen some large GP-led single-asset transactions in infrastructure and real estate in particular which have been driven by a variety of factors.
Some of these transactions have had rollovers for existing co-investors and fund holders, which takes pressure off the new money that needs to come into the transaction, Ince said. These transactions also took place in hot sectors, with large alternatives groups behind them, Gales added, calling such deals “unusual”.
To get these large transactions over the line, you “need that something extra, whether it’s the roll, or the GPs coming in via a continuous vehicle or there’s some co-invest”, Amanda Dupuy Ugarte, a managing director on Lazard’s private capital advisory team said, adding: “Once you have diversification, then groups can write larger checks and that sort of opens things up a little bit.”
Size limits for private equity
On the private equity side, Lazard is advising its clients that single asset transactions around the mark $2.5 billion are “really as big as you can go” in today’s market, Ugarte said.
Ugarte said she was aware of one single-asset transaction last year worth $4.5 billion in which there was direct investment that happened alongside the transaction.
At $2.5 billion this year, “you are sort of tapping out the single-asset market”, she added. A single-asset continuation fund of this size “would require significant syndication or some element of a co-investment alongside a continuation fund”.
According to a report from PJT Partners in November, a meaningful number of sub-$500 million mandates launched in the third quarter, focusing on an increased number of buyers with mid-market appetite.
Carmela Mendoza contributed to this report.