Blackstone Group LP agreed to buy a roughly 50 percent stake in six New York-area office properties from RXR Realty, its largest acquisition yet in an expansion toward purchasing stable, well-leased real estate.
RXR plans to sell Blackstone part ownership in the 5.3 million-square-foot (492,000-square-meter) portfolio, valued at $4 billion, the companies said in a statement Wednesday. The deal involves Manhattan’s Starrett-Lehigh building; 1330, 620 and 1166 Avenue of the Americas; 340 Madison Ave.; and University Square Campus near Princeton, New Jersey.
RXR, a Uniondale, New York-based real estate company run by Scott Rechler, said it will continue to operate the properties.
RXR is “uniquely positioned to unlock the incremental upside in the portfolio,” Jon Gray, global head of real estate for Blackstone, said in the statement. “We look forward to finding more opportunities to work on together in the future.”
Blackstone, the world’s biggest private-equity investor in real estate, is raising a new fund to buy core-plus real estate, or prime properties that may require relatively minor leasing or renovations to boost returns. Chairman and Chief Executive Officer Stephen Schwarzman said last year the company could have $100 billion of such properties under management over the next decade.
For RXR, the deal offers the opportunity to “harvest value” from Manhattan properties acquired since 2009, as the market recovered from the global financial crisis, Rechler said in an interview. Prices for office buildings in New York have surpassed the prior peak, propelled by demand from both domestic and foreign investors seeking safety and steady growth.
“It’s a way of taking chips off the table, and allows us to invest in new opportunities to create value,” Rechler said. “That’s always been our mantra.”
RXR DealsNew York office rents and property values should continue to rise, Rechler said.
“If I thought we had hit the top, we would have sold 100 percent of our interests and we wouldn’t be buying 32 Old Slip, 61 Broadway, 530 Fifth,” he said, referring to recent RXR transactions.
The transaction is the first large-scale recapitalization of the RXR portfolio since the company was created in 2007, following the sale of Rechler’s Reckson Associates Realty Corp. to SL Green Realty Corp., he said.
Deal CompromiseThe deal with Blackstone is “something of a hedge” by RXR, said Ben Carlos Thypin, director of market analysis at New York-based property-research firm Real Capital Analytics Inc.
“It’s a compromise between selling outright and calling a top, and continuing to ride things out,” he said. “It’s the best of both worlds.”
Read More: http://www.bloomberg.com/news/articles/2015-02-11/blackstone-to-buy-stake-in-new-york-area-rxr-buildings
Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.