New York private equity real estate powerhouse The Blackstone Group and San Francisco-based bank Wells Fargo, are poised to complete the biggest private property transaction since the global financial crisis.
The two organizations have announced a deal to acquire the majority of the real estate assets of GE Capital, the financial arm of US conglomerate GE, for approximately $23 billion.
The deal further cements Blackstone as the dominant buying force in modern day private real estate investing.
It breaks down with Blackstone buying GE’s equity real estate assets in the US for $3.3 billion on behalf of its Blackstone Real Estate Partners VIII, global opportunity fund, which closed earlier this month on $14.5 billion, a record amount for the firm and the wider sector. These assets include offices in Southern California, Seattle and Chicago.
Blackstone is also buying GE’s European equity real estate assets, comprising office, logistics and retail assets, mainly in the UK, France and Spain, for €1.9 billion. These are being acquired for its BREP Europe IV fund, for which the firm raised $8.8 billion last year. The logistics assets will be placed in Blackstone’s logistics business in Europe, Logicor.
Meanwhile, the firm’s debt fund business, Blackstone Real Estate Debt Strategies, is buying a portfolio of $4.6 billion portfolio of first mortgage loans, primarily made against Mexican and Australian. Wells Fargo is providing the financing for this part of the transaction.
Wells Fargo, for its part, has agreed to buy performing first mortgage loans in the US, UK and Canada that are valued at about $9 billion.
The mega-deal with GE follows Blackstone’s purchase last November of a portfolio of 10,000 homes in Japan in a deal valued at ¥190 billion (€1.49 billion; $1.57 billion), in what was one of the biggest private property deals in the country since the crisis.
The sales of property by GE are part of a broader strategy to steadily repositioning itself away from the financial services sector and to become an industrial company more focused on other sectors. According to US media, the sales are expected to help to provide the company with proceeds to fund a $50 billion share buyback.
Jon Gray, global head of real estate for Blackstone, said, “We are delighted to partner with GE on another major transaction and we thank them for their confidence in us. We also thank Wells Fargo for our longstanding relationship, and for their swift execution on this investment. This transaction clearly demonstrates the unique scale and reach of our real estate platform.”
The deal is expected to crystalize in phases following regulatory and other approvals from the second quarter onwards.