Blackstone sells Canadian office portfolio

The Blackstone Group has sold a portfolio of 29 refurbished office buildings located throughout Canada to Dundee Real Estate Investment Trust for C$831.8 million ($881 million). Sources familiar with the situation told PERE that the New York-based private equity and real estate giant reached a full agreement with Dundee, which was clinched with a C$30 million deposit on the portfolio. The sale is expected to close by 15 August.

According to an announcement by the Toronto-based REIT, Dundee will be selling five of the 29 office properties upon closing—four to another REIT and one to a private buyer. TD Securities has committed to finance the entire acquisition with a secured loan. 

As previously reported in May, Blackstone hired CIBC World Markets to sell the renovated, nearly fully-occupied office properties, which are located in primary cities such as downtown Toronto, Calgary, Edmonton and Ottawa. The buildings in the portfolio comprise 3.2 million square feet of space and currently are roughly 96 percent occupied.

Blackstone began acquiring the properties, which were less than 90 percent occupied at the time, in late 2004. After succeeding in upgrading and leasing up the buildings, the firm felt that market conditions were right to begin selling the portfolio. Since these properties were acquired through an opportunistic fund, the plan has always been to sell them, the source noted. 

One source forecast that Blackstone’s investors could see IRRs of 23 percent as a result of this deal. Blackstone officials declined to comment.

On Thursday, Blackstone reported second quarter real estate revenues of $648.5 million, up significantly from $208.5 million for the same period last year. Real estate earnings jumped to $453.5 million in the second quarter from $121.4 million for the same period in 2010.