Blackstone Group agrees to acquire BioMed Realty Trust for $4.8 bn

Blackstone Group agreed to the acquisition of landlord BioMed Realty Trust Inc for $4.8 billion, looking to growth in real estate demand from the life sciences and biotechnology industries.

According to a statement yesterday the world's largest private equity investor in real estate will pay $23.75 a share in cash,, which was around 24 per cent over the closing share price of BioMed on 22 September, the day before Bloomberg reported that the San Diego-based real estate investment trust was working with Morgan Stanley to explore a sale.

Shares of real estate investment trust (REIT) have been hammered this year as investors prepare for the first interest-rate hike since 2006, creating opportunities for buyers like New York-based Blackstone to acquire companies relatively cheaply. Health-care spending is rising fast in the US, boosting demand for laboratory space that could accommodate pharmaceutical developers and manufacturers.

BioMed "was trading at a discounted price because the public market perception of the company was relatively poor," said John Kim, an analyst at BMO Capital Markets Corp in New York, The San Diego Union-Tribune reported. "Even though it's a somewhat specialized asset class, the location of the assets is very attractive and the biotech industry is flourishing."

The all-cash deal represented a 24-per cent premium over the San Diego company's share price in late September, when Bloomberg News reported that BioMed was up for sale.

The company counts local organisations such as UC San Diego, The Salk Institute of Biological Studies and the J Craig Venter Institute among its 250 tenants. Around half of the tenants  nationwide are research institutions or large public companies.

While Blackstone had expanded its property portfolio over the years, it had been tough going for it to boost its share price during the recent biotech industry boom.

According to analysts, the company had faced a number of challenges including earnings as also management changes in the short term, which had contributed to keeping its share price from rising.

The first six months this year had seen revenue dip 1 per cent to $336 million.

Earnings per share came in at 20 cents which was up slightly over 19 cents per share in earnings for the same period last year.

BioMed "was trading at a discounted price because the public market perception of the company was relatively poor," BMO Capital Markets analysts John Kim told Bloomberg. "Even though it's a somewhat specialized asset class, the location of the assets is very attractive and the biotech industry is flourishing."