Blackstone buys Alban Gate for core business

The New York firm has bought a London office for £300 million in its maiden deal for a ‘light-fix’ strategy. The seller was Carlyle on behalf of its European opportunity fund.

The Blackstone Group has completed its first deal for its new core-plus real estate business buying the Alban Gate office complex in London for £300 million (€378 million; $514 million) from The Carlyle Group.

Alban Gate is a 382,000 square foot office over 22 floors fully let to JP Morgan that underwent an extensive refurbishment earlier this year. Much of the space is now sub-let to law firm Nabarros.

Blackstone is making the investment for its new ‘light-fix’ strategy – ostensibly a core-plus strategy through which Blackstone acquires prime properties that possess some scope for increasing income. Blackstone said previously it had formed the strategy in response to demand from the firm’s investors.

Alban Gate is the first asset it has acquired for the European leg of the strategy which begun in the US at the end of last year. The deal represents an unusual twist in European private equity real estate because the seller, Carlyle, is exiting an investment on behalf of an opportunity fund to a firm more best known for managing opportunity funds itself.

Nonetheless, Blackstone is positioning itself today as more than just a manager of opportunistic real estate strategies and last week, PERE revealed how the firm is ramping up its team to prepare for the transition. Indeed, it is understood the firm has begun hiring externally in London for the strategy as well as making internal hires.

Washington DC-based Carlyle first bought Alban Gate four years ago as part of a package of six landmark London properties that were formerly part of the White Tower 2006-3 CMBS that Carlyle bought for £671 million. The investment was made on behalf of its €2.2 billion Carlyle European Real Estate Partners III that was launched in 2007.

Out of the six properties, Carlyle has so far sold Millennium Bridge House in November 2013 for £87.6 million, 60 Victoria Embankment in June 2011 for around £175 million and the BSI tower in Chiswick in September 2010 for £30.5 million. With the sale of Alban Gate, that means it has realized £593 million from the portfolio.

It is left with Sampson House data-centre and Ludgate House office, which are located immediately south of Blackfriars Bridge for which Carlyle received planning permission earlier this year to develop a major 1.4 million square foot residential and office project in place of the existing two buildings and, as announced on 10 June 2014, it is currently seeking a funding partner to progress the development, which has been launched as ‘Bankside Quarter’.