Christopher Peatross resigned as president and chief executive officer of Blackstone Group LP’s Equity Office Properties to form a company to buy commercial real estate with backing from the New York-based buyout firm.
Peatross, 44, left Chicago-based EOP June 30 to form Swift Realty Partners in San Francisco. The company plans to invest in office properties and research and development sites with its own money and capital from Blackstone, he said in an interview. Blackstone raised a $10.9 billion real estate fund in 2008.
Peatross said he expects to buy properties valued at $20 million to $200 million, mainly in Northern California but also in other markets on the West Coast.
“I don’t think the deal flow is out there today” to invest larger amounts, Peatross said in a telephone interview. “The latter part of this year and next year there are going to be people buying real estate. There’s distress in the market.”
U.S. commercial property values have fallen more than 40 percent from the October 2007 peak, according to Moody’s Investors Service. The national office vacancy rate climbed to 17.4 percent in the second quarter, the highest level since 1993, the property research firm Reis Inc. said July 6.
Blackstone bought Equity Office Properties Trust at the height of the real estate boom for $39 billion, including debt. The firm quickly resold more than $28 billion of buildings to pay down borrowings. The New York-based company is working to extend the maturity on $4.9 billion of loans from the February 2007 buyout.
Staying in California
EOP, which now includes assets from Blackstone’s takeovers of CarrAmerica Realty Corp. and Trizec Properties Inc. in 2006, recently consolidated its leadership into one location. Tom August, who was chairman before succeeding Peatross as CEO, will be moving to Chicago from Dallas. Peatross had been based in San Mateo, California, and said he wanted to stay on the West Coast.
“I’ve always wanted to start my own company,” Peatross said. “Blackstone gave me this opportunity and it felt like a good time.”
Blackstone spokesman Peter Rose declined to comment.
Peatross declined to say how much Blackstone is investing. Swift Realty is seeking “value-add and opportunistic” investments, he said.
“We’re starting to see some signs of recovery but it’s not perfect,” he said. “The concentration of buyers is around core assets, assets that will carry them through the next year or two.”
Employment, the main driver of office-space demand, remains weak. While 882,000 U.S. nonfarm jobs were created in the first half of this year, 58.5 percent of those were from the temporary-services industry and government workers hired for the census, according to the Bureau of Labor Statistics.
Peatross earned a bachelor’s degree in quantitative economics from Stanford University in Stanford, California. He started his career at Spieker Properties, once the biggest commercial landlord on the West Coast, where he stayed six years. The company was later bought by Equity Office Properties Trust, then a publicly traded company led by Sam Zell.
He spent two years at Hunter Properties, a developer of retail real estate, and then worked three years at Catellus Development Corp., an industrial developer. He next joined DivcoWest Properties overseeing 9 million square feet of office, research and development and retail properties.
In 2002, he joined CarrAmerica as managing director for the San Francisco Bay Area.
August, 61, became chairman of EOP in October. From February 2008 to August 2009, he was chief operating officer of Behringer Harvard REIT I Inc., also serving as the REIT’s CEO from May 2009 to August 2009. From October 1999 to January 2006, he was president and CEO of Prentiss Properties Trust and prior to that held other executive roles at the REIT, an affiliate and the predecessor company starting in 1987.