Blackstone to sell Canadian office portfolio

The New York private equity giant is looking to sell 29 office buildings throughout Canada with a value of $921 million.

The Blackstone Group has hired CIBC World Markets to sell 29 office buildings located throughout Canada with a value of C$900 million ($921 million).

The New York-based private equity and real estate powerhouse is looking to capitalize on investor demand for refurbished, nearly fully-occupied properties, according to a source familiar with the situation. The offices—located in primary cities such as downtown Toronto, Calgary, Edmonton and Ottawa—comprise 3.2 million square feet of space and currently are about 96 percent occupied on average.

Blackstone and Slate Properties, a Toronto-based private equity firm, began acquiring the properties, described as “Class B buildings in Class A locations,” in late 2004, according to the source. When the partnership bought the buildings, which were less than 90 percent occupied at the time of purchase, it refurbished them to attract new tenants.

After succeeding in upgrading and leasing up the properties, Blackstone 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. Blackstone officials declined to comment.

The 29 buildings, which Blackstone controls and Slate holds a stake in and manages, constitute all of Blackstone’s office real estate in Canada. Possible buyers include Canadian real estate investment trusts and pension funds, and the firm hopes to have a buyer for the entire portfolio within the next 60 days.

While Blackstone plans to sell stabilized office buildings in Canada, it has been stepping up acquisitions of US properties in need of operating improvements or debt relief. Indeed, in April, the firm agreed to pay $160 million for the top 12 floors of the former New York Times headquarters in midtown Manhattan. And in March, Blackstone won the bidding for control of a 22-story office building at 1140 Sixth Avenue, which has been more than 50 percent vacant.