Blackstone Group LP (BX), the biggest manager of private-equity real estate funds, agreed to sell its 50 percent stake in London’s Broadgate complex for more than 1.7 billion pounds ($2.7 billion) in one of Europe’s largest office deals, said two people with knowledge of the transaction.
A sovereign-wealth fund is under contract to make the acquisition, said the people, who asked not to be identified because the deal is private. Norway’s wealth fund, which had been in talks for the stake, isn’t the buyer, one of the people said, declining to name the purchaser. New York-based Blackstone agreed not to sell the stake for three years after buying it from British Land Co. in a 2009 deal that valued the complex at 2.1 billion pounds, and investing in improvements.
“You have to assume that anyone that bought major property in 2009 or 2010 is well into the money,” said Dan Fasulo, managing director of Real Capital Analytics Inc., a property-research firm based in New York. “Blackstone and others that took the risk of making large acquisitions at that time are going to be richly rewarded.”
Broadgate, in the City of London financial district, includes 16 office buildings on 30 acres (12 hectares), along with restaurants, shops and health clubs, according to British Land’s website.
About 30,000 people work in the 4-million-square-foot (371,600-square-meter) complex, which has 700,000 square feet under development. British Land and Blackstone are developing the 12-story building where UBS AG plans to consolidate its London trading operations. The shell and core are scheduled to be completed in November 2014.
Blackstone also has begun raising a new fund for European real estate targeted at $5 billion, according to the people. It would be Blackstone’s fourth for European property. The company expects to raise the fund mostly from U.S., Middle Eastern and Asian investors, the people said. Previous investors in Blackstone funds include China Investment Corp., Abu Dhabi Investment Authority and Hong Kong Monetary Authority.
Christine Anderson, a spokeswoman for Blackstone, declined to comment on the property sale and fundraising. The Financial Times reported the fund-raising plan yesterday.
British Land, a London-based real estate investment trust, owns the rest of Broadgate. Charlotte Whitley, a spokeswoman for the company, declined to comment. British Land said in a January statement that it planned to keep the stake and, according to Chief Executive Officer Chris Grigg, the company had a “strong vision” of how Broadgate will develop.
The 2009 sale of a 50 percent stake in Broadgate, at a time when the complex’s value was falling, reduced British Land’s debt and made acquisitions easier.
“The fact that the value of the asset has gone up so much suggests British Land shouldn’t have sold it, but equally they needed to,” said Alan Carter, a London-based analyst at Investec Plc. “The world was a very different place in 2009.”
Fasulo said 2009 “was a period of extreme illiquidity for billion-dollar transactions, and Blackstone stepped right into that void at the right time in London.”
Blackstone has been moving to sell its largest real estate holdings as property values rally. In the U.S., it hired bankers for hotel and shopping-center company initial public offerings, and has been selling office buildings acquired in the years leading up to and during the market’s peak in 2007.
In Europe, Blackstone has been buying property assets after the financial crisis caused prices to plunge. The firm in November bought a 501-room hotel in Dublin for 67 million euros ($90 million), less than a quarter of what it sold for in 2007, and has said it will spend 16 million euros refurbishing the property.
Blackstone also has bought debt of Dutch developer Multi Corp. in an effort to gain control of a pan-European shopping center business, people with knowledge of the situation have said. The firm has teamed with Ivanhoe Cambridge, the real estate unit of Canada’s largest pension fund, to buy loans backed by a stake in Gecina SA, a French REIT that is Paris’s largest publicly traded office landlord. Blackstone’s London-based LogiCor unit owns and operates warehouses in Europe.
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