Blackstone, Wells Fargo Buy $23 Billion of Property From GE

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New Delhi, April 11, 2015
Blackstone Group LP and Wells Fargo & Co. agreed to buy most of General Electric Co.’s real estate assets in a deal valued at about $23 billion as the industrial conglomerate takes advantage of strong property markets to further shrink its financial unit.

Blackstone units will acquire GE’s U.S. holdings, mainly office buildings in Southern California, Seattle and Chicago, for $3.3 billion, along with a $4.6 billion portfolio of commercial mortgages. The firm also agreed to buy European assets including office, industrial and retail properties, for 1.9 billion euros ($2 billion) and commercial mortgages in Mexico and Australia for $4.2 billion.

Wells Fargo will buy performing mortgages on commercial real estate valued at $9 billion in the U.S., U.K. and Canada, according to a statement by the companies Friday. GE said it’s in talks with buyers for other commercial property deals that will raise the value of assets it’s selling to $26.5 billion.

The sales advance GE Chief Executive Officer Jeffrey Immelt’s goal of paring GE Capital, the unit that holds the real estate, after the division’s lack of access to credit during the 2008 financial crisis put the parent company at risk. GE Capital has been disposing of billions of dollars in holdings, including foreign bank stakes, while Immelt works to bulk up the industrial side of the Fairfield, Connecticut-based company’s business.

‘Major Step’

“This is a major step in our strategy to focus GE around its competitive advantages,” Immelt said in a statement.

The deal is the largest real estate transaction since the financial crisis and among the biggest for New York-based Blackstone, whose major purchases include the $39 billion acquisition of Equity Office Properties Trust in 2007 and the $26 billion takeover of Hilton Worldwide Inc. the same year.

Blackstone, the largest private-equity real estate investor, is looking for purchases as it begins to invest a record property fund of more than $14.5 billion. Bargains have become harder to find as investors around the globe seek places to put money amid low interest rates, driving up property values. Commercial real estate prices in the U.S. are 6.9 percent above their 2007 peak, Moody’s Investors Service reported this week.

San Francisco-based Wells Fargo, the country’s biggest commercial real estate lender, has purchased portfolios of property loans from competitors as it seeks to add higher-yielding assets.

Joint Deals

GE was among the world’s biggest property investors before getting burned in the financial crisis, with real estate assets of almost $100 billion in 2008. Since 2010, the company had moved to expand commercial real estate lending and debt investments as it sold properties.

The company and Blackstone have a long history of working together. Blackstone previously bought billions of dollars of real estate from GE, including apartment properties in the U.S. and Japan and office buildings in Australia. The industrial company’s lending arm in 2011 agreed to provide about $800 million to help finance Blackstone’s $1.08 billion purchase of U.S. suburban office buildings.Bloomberg