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A Blackstone Life Sciences Recapitalization Will Send $2B CMBS Deal To Market

Kendall Square, pictured on the left side of the river, is Greater Boston’s tightest life sciences market.

Blackstone Group continues to plumb the life sciences market for revenue as demand for the sector is as strong as it has ever been.

The private equity giant recapitalized a portfolio of 17 buildings totaling about 2.4M SF with new debt worth about $3.1B, CoStar Group reports. Two-thirds of the portfolio is in Cambridge, Massachusetts, which still holds the crown as the most competitive submarket in the world for the life sciences sector, and the portfolio overall is 97% occupied.

Though Blackstone entities are providing $1.1B in debt financing, the bulk of the new debt came from a loan originated by Deutsche Bank, Wells Fargo, Goldman Sachs and Citigroup worth $2B, CoStar reports. Deutsche Bank is rolling the loan into the commercial mortgage-backed security LIFE 2021-BMR, according to DBRS Morningstar pre-rating data obtained by CoStar. It could wind up as the largest CMBS deal in 2021 so far.

As life sciences companies have never had a higher profile than in the past few months due to the development and rollout of the coronavirus vaccine, Blackstone has been solidifying and expanding its position. One of the company's finite funds sold BioMed Realty Trust for $14.6B in October to a different Blackstone fund for a longer-term hold, just a couple of months before Blackstone Property Partners Life Sciences fund purchased a $3.5B portfolio focused in Cambridge from a Brookfield entity.

Though much of the attention paid to the CMBS market in the past few months has been focused on the health of securities backed by hospitality and retail properties, business as usual carries on in sectors like life sciences that are buoyed by strong performance and even stronger future outlooks. Blackstone has agreed to repay the $2B loan at a floating rate of Libor plus 1.466% on an interest-only basis through the initial maturity date in two years, with three one-year extension options, CoStar reports. Though long-term interest rates have been on the rise recently, Libor has stayed at historic lows.