Blackstone is preparing sales valued at £735m from its central London office portfolio.
Blackstone this week agreed the £285m sale of the 216,000 sq ft Lacon London, WC1, to a private Middle Eastern investor. The deal leaves 13 buildings in its London portfolio.
St Katharine Docks, E1, has been available since May for £435m through GM Real Estate and CBRE, although a sale has yet to be agreed.
The private equity firm is one of the biggest office owners in the capital and its portfolio spans more than 4.7m sq ft. EG data shows Blackstone has ploughed more than £3bn into central London offices over the past five years. The figure is based on prices paid for its existing assets, although the value today will be considerably higher.
Many of its investments are now coming to maturity as its “buy it, fix it, sell it” mantra plays out. With a typical hold period of around five years, it is a natural time in many instances for Blackstone to sell up and return cash to investors or to recycle capital into other opportunities. However, the company’s funds usually have 10-year lives, so maturity of funds is not putting the company under pressure .
When Blackstone started aggressively collecting London office assets it is likely that a prospective listing would have been considered as a potential exit for some of its purchases. All listed companies with major London office exposures are now trading at significant discount meaning that is now not a feasible avenue.
Blackstone still has a relatively strong market to sell into where it so chooses. Pricing for large, well-located and well-let office assets on the open market has been held up in part due to the weight of capital from overseas that is being drawn in by the depreciation of sterling.
The Adelphi Building, WC2, which was bought in 2012 for £265m, has been refurbished and is now full, following more than 270,000 sq ft of lettings this year. It is understood, however, that it is unlikely to be offered for sale in the near future.
Similarly, 20 Old Bailey, EC4, soon to be fully let, with Metro Bank taking the last 60,000 sq ft in the 240,000 sq ft building, is understood not to be up for sale at present.
St Katharine Docks is something of an outlier in the Blackstone portfolio, having been bought as part of the 2014 £448m take-private deal of Max Property Group, rather than a targeted single-asset purchase. Including London’s only marina it is not a traditional Blackstone investment and was part of a package that included Max’s industrial and logistics portfolio.
Another slight anomaly is the 334,000 sq ft Building 7 at Chiswick Park. Blackstone sold the park to CIC for £780m at the start of 2014, having bought it for only £480m three years earlier, but held on to the then undeveloped plot to use more upside than it would selling the Chinese sovereign wealth fund.
Long-term holds
Some of its portfolio was bought for its core-plus strategy launched in 2014 that has thus far put separate account mandates into small clubs to make investments with longer time horizons. Times Square, E1; 125 Old Broad Street, EC2 and Alban Gate, EC2 were all core-plus buys with target returns of around 10%. Blackstone has also started fundraising for its first pan-European core-plus co-mingled fund that will allow it increased capacity to undertake more such purchases.
Despite its proposed sales, Blackstone’s appetite for London offices has not gone away, underscored by June’s £500m investment in flexible office provider The Office Group. It completed a final close of €7.8bn for its Blackstone Real Estate Partners Europe V fund in June, still has plenty of capital to deploy, and it is to be expected that there will be just as many purchases as there will be disposals.
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