The Blackstone Group has purchased 36 apartment properties across the US for approximately $1.7 billion, as it seeks to expand its newest real estate platform in multifamily, according to sources familiar with the matter. The seller of the assets was New York-based real estate investment firm The Praedium Group. Both Blackstone and Praedium declined to comment.
The portfolio is said to encompass 11,000 apartments, with about half of the properties located in California, Washington, DC and Boston. While it was unclear at press time when Praedium originally acquired the assets, its two most recent property funds, Praedium Fund VI, which raised $700 million in 2005, and Fund VII, which closed on $900 million in 2007, have yet to be liquidated. The majority of the capital in both vehicles had been invested in the multifamily sector.
The transaction represents Blackstone’s first major multifamily acquisition since buying majority interests in 80 apartment complexes from GE Capital for $2.7 billion in 2013. That deal – which involved about 30,000 units in Texas and the Southeast – was the basis for Blackstone launching its multifamily platform and building a portfolio company, called LivCor, in the sector.
With the addition of the Praedium properties, LivCor’s portfolio would expand to about 43,000 units. LivCor, based in Chicago, also would now be larger than Gables Residential, which has about 40,000 units and was put up for sale last summer. Clarion Partners is said to have won the auction for Gables and agreed to acquire the Atlanta-based firm for more than $3 billion with a group of institutional investors, in one of the largest US residential real estate deals since the financial crisis.
Bloomberg first reported the Blackstone and Praedium deal yesterday.
Multifamily remains one of the best-performing commercial real estate sectors in the US. According to a report from real estate services firm Marcus & Millichap, apartments outperformed expectations for 2014, with the national vacancy rate dipping as low as 4.2 percent last year, while homeowner declined to a 19-year low of 64.4 percent.
“Apartment values now measure 13 percent above the 2007 peak, awash in capital and investor sentiment,” the report said. “The forces shaping demand in this cycle do not appear to be tailing off, creating and sustaining demand momentum in a period of historically low vacancy rates.”