Manifest destiny

The Blackstone Group has agreed to sell a portfolio of West Coast office properties to Arden Realty as the private equity firm continues its massive sell-off of assets in non-core markets. Although the purchase price was not disclosed, news reports have pegged the sale price in excess of $2 billion (€1.5 billion).

The portfolio consists of 38 assets comprising 106 office buildings and 5.9 million square feet in San Diego, Orange County, San Francisco, Seattle, Portland and Salt Lake City. Blackstone acquired the properties last year via its $5.6 billion privatization of CarrAmerica. The portfolio is approximately 82 percent leased.

“We're value-add players,” said Robert Petticord, chief operating officer of Arden. “We're looking for a story, whether it's in the lease-up or the rent rolls—because of the markets and the vacancy, we feel we can add value.”

The CarrAmerica deal represents Arden's largest transaction since the company was acquired by GE Real Estate in May 2006. Though Arden was historically focused primarily on suburban office properties in Southern California, Petticord noted that the company is now looking to grow its presence in Southern California, Northern California, Portland, Phoenix and Seattle. Prior to the CarrAmerica deal, Arden had acquired approximately $800 million of new properties on the West Coast in the past 12 months.

The CarrAmerica disposal follows similar moves by Blackstone, which has been busy shedding assets that it acquired as part of larger portfolios over the past year, including the privatizations of Trizec and Equity Office Properties. The private equity firm, which is in the process of incorporating its entire office portfolio into one platform, has already sold approximately $25 billion of assets from the Equity Office portfolio. The properties sold to Arden are all in markets where Blackstone has previously sold Equity Office assets.

At the time of the Blackstone acquisition, CarrAmerica had properties in 12 markets throughout the country, but its largest market was Northern California, where it owned or managed more than 5 million square feet of office space. Blackstone will continue to own the company's significant holdings in the Silicon Valley market, where rents are expected to increase on the back of the region's economic recovery.

A spokesperson for The Blackstone Group declined to comment on the transaction, as did Christopher Peatross, chief executive officer of CarrAmerica.

fortress, Centerbridge in $8.9bn gaming deal
Penn National Gaming, a company that operates casinos and horse racing facilities, has entered into an agreement with Fortress Investment Group and Centerbridge Partners to be acquired for approximately $8.9 billion (€6.7 billion). Penn National went public in 1994. It currently owns facilities in 14 states and had revenues over $2 billion in 2006. The two private equity firms are part of a recent trend of investments in the gambling sector. Bloomberg estimates that there have been more than $26 billion in proposed gaming deals in 2006, more than the previous five years combined.

Goldman to buy Equity Inns for $2.2bn
Goldman Sachs has agreed to buy publicly traded hospitality REIT Equity Inns for $2.2 billion (€1.7 billion), including debt, via its private equity real estate arm. Equity funding for the deal will come from Whitehall Street Global Real Estate 2007, which closed last month on $4 billion. Equity Inns owns more than 130 mid-market hotels under the Courtyard, Hilton Garden Inn and Hampton Inn banners. In another hospitality deal last month, Whitehall also purchased a majority stake in the time-share resort business of ASNY, which has developed properties in California, Florida, Hawaii and Nevada.

Oaktree sells LA studio to Carlyle for $150m
Carlyle Realty Partners, the US property arm of The Carlyle Group, has reportedly acquired Manhattan Beach Studios, a soundstage and office complex south of Los Angeles, for $150 million (€113 million). The seller was Los Angeles-based private investment firm Oaktree Capital Management. Shamrock Holdings, the private equity firm chaired by Roy Disney, developed the studio, which houses 14 stages, eight production offices and a four-story office tower on 22 acres of land. Shamrock sold the complex to Oaktree in 2004 for approximately $100 million.

Istithmar buys Barneys department store for $825m
Istithmar, the private equity firm owned by the government of Dubai, has agreed to acquire luxury department store chain Barneys New York for $825 million (€635 million). Jones Apparel Group, which currently owns Barneys, bought the chain three years ago for $400 million. Istithmar owns US discount retailer Loehmann's and buildings at 230 Park Avenue and 450 Lexington Avenue, as well as the W Hotel in Union Square, the Knickerbocker hotel and a majority stake in the Mandarin Oriental hotel in the Time Warner Center.

Lone Star acquires sub-prime lender for $400m
Lone Star Funds has acquired sub-prime lending company Accredited Home Lenders for $400 million (€305 million). Under the terms of the deal, Lone Star is paying $15.10 per share for the NASDA-Qlisted company, which is 72 percent lower than the stock's 52-week high of $53.45, but still well above its March 2007 low of $3.77. The sub-prime sector in the US has been hit hard recently, with firms like New Century Financial filing for bankruptcy as the residential housing market has cooled and defaults among the riskiest borrowers are increasing.