Blackstone to buy San Francisco offices for $489m

The Blackstone Group is under contract to buy two San Francisco office buildings for $489 million, a person familiar with the deal told PERE.

The firm declined to comment, but PERE understands that Blackstone is buying Market Center, a 720,000 square foot property, through Blackstone Real Estate Partners (BREP) VIII, the firm's latest opportunistic fund. Blackstone closed the vehicle at $15.8 billion in October.

Blackstone is acquiring the two office towers comprising Market Center from Toronto-based Manulife Financial, which bought the complex in September 2010 for $267 million from Deutsche Asset Management, according to real estate data provider Real Capital Analytics. The complex, at 555 and 575 Market Street, is 92 percent occupied, anchored by ridesharing technology company Uber, which has a 200,000 square foot lease. PERE understands that Blackstone is buying the property for below its asking price: Manulife put the asset up for sale in February for $750 per square foot, while Blackstone is buying the property for about $680 per square foot.

Other purchases from BREP VIII include a December 49-property retail portfolio purchase from RioCan Real Estate Investment Trust for C$2.7 billion ($1.9 billion) and the $2 billion acquisition of a 10,399-unit apartment portfolio in November from Greystar Real Estate Partners.

Nearly all of the capital in BREP VIII – which is the largest closed-end property vehicle ever raised – comes from US and foreign investors that had previously participated in Blackstone's real estate funds. These limited partners included the Teachers' Retirement System of the State of Illinois, the Pennsylvania Public School Employees' Retirement System, the Teacher Retirement System of Texas, New York State Common Retirement Fund, which all allocated $300 million to the vehicle, according to PERE Research & Analytics.