Blackstone, the New York-based private equity real estate giant, has made its first strategic move in the co-working office sector with the acquisition of a majority interest in The Office Group (TOG), a London-based flexible office provider.
Blackstone said the majority stake was acquired from TOG co-founder Lloyd Dorfman, who also founded foreign exchange business Travelex.
The deal values TOG at approximately £500 million ($639.7 million; €571 million). It is expected to close later this month.
Blackstone invested capital from its Blackstone Real Estate Partners Europe V opportunity fund. The pan-Europe vehicle was closed earlier this month on €7.8 billion, a firm and region record. The firm is aiming for a 15 percent net IRR and a 1.7x equity multiple from investments made via the fund.
The asset manager said the transaction highlights the increasing popularity and appetite for assets in the co-working sector among institutional investors.
Blackstone’s head of European real estate, Anthony Myers, said the firm would be capitalizing on the co-working sector’s continued growth.
“The traditional workspace is being redefined in gateway cities across the globe, as evolving business practices increase demand for flexible office space to suit the needs of the discerning modern occupier,” Myers added.
It is understood Blackstone is currently looking to acquire further co-working assets across Europe in a bid to build market share.
TOG, which was co-founded in 2003 by Dorfman, Olly Olsen and Charlie Green, owns 36 buildings, mainly in central London, which house more than 15,000 occupiers. Its clients currently include AOL, Dropbox and Pinterest as well as large corporates such as British Gas and Santander.
In the UK, its main competitors are fellow co-working providers Regus and Second Home.
TOG’s three co-founders will remain shareholders in the group, but Olsen and Green will continue in their existing roles as co-chief executive officers of the business.
“In my seven years with the business, we have significantly expanded the portfolio and client base. TOG is a dynamic and innovative business, with buildings in optimal locations operating in a market whose time has come,” said Dorfman. “London is the leading city in the world for flexible office space while current trends in the labor market show growing appetite for this type of work environment.”
Rothschild acted as sole financial adviser to TOG on the sale.