Blackstone to buy IM business of Capital Trust

The New York-based private equity and real estate giant continues to expand its real estate debt business with the acquisition of the investment management arm of Sam Zell’s real estate finance REIT.

Blackstone has agreed to buy CT Investment Management (CTIMCO), the investment management business of New York-based Capital Trust, and its fund co-investments for $20 million. Under the agreement, the private equity and real estate giant also will purchase an 18.2 percent stake, or five million shares, in the real estate finance REIT for an additional $10 million. Additionally, a Blackstone affiliate will manage Capital Trust, whose chairman is Sam Zell.

Upon closing of the transaction, CTIMCO will become part of Blackstone’s growing Real Estate Debt Strategies (BREDS) business, which the firm launched in 2008. BREDS currently has more than $4 billion in assets under management and primarily invests in opportunities in mezzanine debt; recapitalizations; legacy debt investments; listed equity and debt securities; and preferred equity in the US and Europe.

“This transaction will create substantial value for Capital Trust’s shareholders while expanding BREDS’ asset management and servicing capabilities and augmenting our industry leading commercial real estate debt platform,” said Michael Nash, senior managing director and chief investment officer of BREDS, in a statement.

Capital Trust was founded in 1997 by Zell, Craig Hatkoff and John Klopp, who is now co-chief investment officer and co-chief executive officer of Morgan Stanley Real Estate Investing. To date, its investment management business has originated approximately $12 billion of commercial real estate debt and related investments and has raised more than $3.5 billion of private equity capital and more than $10 billion of public and private debt capital, according to its second quarter 2012 report.

CTIMCO currently manages about $4.8 billion of assets, including its public company parent – CT Legacy REIT – five commercial real estate CDOs, three private equity funds and one separate account. In addition, CTIMCO is a special servicer on $2.3 billion of loans.

The business currently is investing CT Opportunity Partners I, a fund with $539.9 million of total equity commitments, as well as its CT High Grade Mezzanine mandate, originating one new $10 million investment during the second quarter. CTIMCO also continues to manage CT High Grade Partners II, which has $552 million of invested capital.

Law firm Paul Hastings represented Capital Trust in the transaction, while Simpson Thacher & Bartlett represented Blackstone.