Blackstone supersizes real estate holdings

Private equity giant Blackstone Group (BX) is supersizing its vast real estate empire, announcing several deals Friday that could push its property and mortgage holdings near the $100 billion mark.

The world's largest alternative asset manager, which already managed $81 billion in real estate assets, partnered with Wells Fargo (WFC) to buy most assets of GE Capital Real Estate in a transaction valued at roughly $23 billion.

The deal, covering both GE Capital real estate and loans, marks the largest real estate transaction since the national recession. Included:

• The $3.3 billion purchase of GE U.S. equity assets by Blackstone's latest flagship global real estate fund, known as BREP VIII. The assets primarily consist of office properties in Southern California, Seattle and Chicago.
• The roughly $2.02 billion acquisition of GE European assets, an office, logistics and retail portfolio by BREP Europe IV, Blackstone's European real estate fund. The assets largely come from the United Kingdom, France and Spain.
• The $4.2 billion purchase of performing first mortgage loans in Mexico and Australia by BREDS, Blackstone's real estate debt fund.
• The $4.6 billion acquisition of GE first mortgage loans by Blackstone's publicly traded commercial mortgage real estate investment trust. The portfolio features diverse property types in the U.S., Canada, the United Kingdom and Germany. Wells Fargo is providing the financing for the transaction.

Separately, Blackstone Property Partners agreed to a $2 billion, all-cash acquisition of Excel Trust (EXL), a San Diego-based real estate investment trust that primarily targets shopping centers and grocery store-anchored investments.

The $15.85-a-share deal represents a premium of nearly 15% over Excel Trust's $13.84 closing stock price on Thursday. The transaction was unanimously approved by Excel Trust's board of directors.

Investors appeared to signal approval, sending Blackstone shares up 2.09% to a $40.02 close in Friday trading after the deals were announced. Excel Trust's shares surged 14.31% and closed at $15.82 — three cents short of Blackstone's offering price.

Jon Gray, Blackstone's global head of real estate, said the GE Capital deal "clearly demonstrates the unique scale and reach of our real estate platform."

Gary Sabin, Excel Trust's chairman and CEO, said the company did not believe markets had accurately reflected the value of the assets. "After reviewing our options, we were pleased to have a group with Blackstone's reputation step forward with this offer," said Sabin.

Blackstone's purchase of the GE first mortgage loans will nearly double the asset base of the private equity firm's real estate investment trust, Keefe, Bruyette & Woods research analysts Jade Rahmani and Ryan Tomasello wrote in a Friday investor note. The transaction eventually should result in a 24 cent to 28 cent increase in core earnings per share, the analysts predicted.

Blackstone will fold the new real estate assets into a sprawling portfolio whose major holdings include Invitation Homes, a U.S. leader in the single-family home rental industry, Logicor, an operator of modern logistics facilities in Europe, and SCP, a Chinese shopping-mall developer and operator.

The company also remains a major institutional investor in Hilton Worldwide, the global hotel chain it took public in 2013 after leading a leverage buyout of the firm in 2007.

The private equity giant's announcement of its latest acquisitions came less than a month after Blackstone said it would buy Chicago's iconic Willis Tower in a $1.3 billion deal that's expected to spur an upgrade of the retail space and observatory of the nation's second-tallest office building.

Blackstone's new deal with GE marks the latest in a series of transactions in which it has been an eager partner as GE sheds its real estate holdings. In November, Blackstone announced a $1.6 billion acquisition of more than 200 GE residential properties in Japan. The portfolio included more than 10,000 units in Tokyo, Osaka, Nagoya and Fukuoka.

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Blackstone's Excel Trust acquisition brings the private equity firm control of 38 retail properties with more than 7.2 million square feet of gross leasable space. The portfolio reflects Excel's strategy of focusing on outdoor shopping centers, including some anchored by large grocery stores like Whole Foods, that attract customers from a larger regional area.