Blackstone Group (BX) announced the sale of its California-based office property, spread across 8.2 million square feet, to Hudson Pacific Properties Inc. (HPP), a Los Angeles-based real estate investment trust, for $3.5 billion.
Blackstone will receive $1.75 billion in cash and 48% stake in Hudson Pacific by vending this portfolio which comprises 26 office buildings.
The property acquired by Blackstone for $39 million, through a leveraged buyout in 2007, formed part of Equity Office Properties Trust. Following the acquisition, Blackstone had flipped some of the property for profits within some time.
Taking advantage of the current market liquidity, Blackstone is working toward satisfying its investors with good returns. It has sold mature funds and returned approximately $16 billion for the 12 months ended Sep 30, 2014.
After the acquisition, Hudson Pacific will have 53 properties in the California region and an enterprise value of $6.5 billion. It will also become one of the largest owners of West Coast office towers.
For Blackstone, the sale represents an end to the series of real-estate sales this year.
Earlier this week, the company announced the sale of IndCor Properties Inc. to a Singapore GIC for $8.1 billion. In another deal, Blackstone agreed to sell an office building in Midtown Manhattan to a real-estate investor for $2.25 billion.
After the sale of California office towers, Blackstone will be left with Equity Office Properties buildings in Boston and west Los Angeles, which it expects to sell by the end of next year.
Our Take
The latest sale comes as the largest vending of office property by Blackstone in seven years. It is expected to be profitable since the firm is selling it during a time when the markets are favorable. Also Blackstone has kept stake to enjoy the upside in the real estate markets.
Moreover, Blackstone has been focusing on increased investments in the European markets, taking advantage of the current distress. This fact is evident from investments of $9 billion made in the European real estate in the previous quarter, and the recent acquisition of five retail assets and First Logistics assets from Novo Banco Group in Portugal on Dec 2, and of 14 retail assets in Netherlands from CBRE Global Investors (CBG).
Blackstone seems to be utilizing the proceeds from sale of properties for funding acquisitions in Europe.
Blackstone Group currently carries a Zacks Rank #3 (Hold). KKR & Co LP (KKR) is a better-ranked stock to consider in the finance space. It holds a Zacks Rank #1 (Strong Buy).
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