Blackstone to Vend Office Buildings - Analyst Blog

The Blackstone Group L.P. BX, in a bid to capitalize on the steady recovery in the housing market, is all set to divest five Boston-based office spaces to a group led by Oxford Properties, a global real estate owner based in Toronto. As reported by The Wall Street Journal, the transaction is worth nearly $2.1 billion.

Oxford Properties successfully earned the deal, beating other bidders including the government of Singapore, the government of Norway and insurer MetLife, Inc. MET. Further, Oxford Properties intends to buy three of the five building spaces in alliance with the asset-management arm of JPMorgan Chase & Co. JPM.

The Boston offices were a part of properties acquired by Blackstone way back in 2007 from Sam Zell's Equity Office Properties Trust. While Blackstone had divested a considerable portion of the property before the financial downturn, it had retained some of it based in Boston and California.

Blackstone, the U.S. based private equity firm has a growth story driven by meaningful investments and returns. With improvement in the real estate market, the price of properties is on the rise. Therefore, Blackstone seems to have chosen an opportune moment for the resale of its properties to earn profits.

Blackstone's committed undrawn capital (total dry powder) reached $48.0 billion as of Mar 31, 2014, up 34% y/y. This, along with the proceeds from the aforementioned deal, will further increase the investment capabilities of the company. Therefore, going forward we foresee enhanced investment activities on the company's front.

Apart from the latest divestiture, Blackstone plans to sell its ownership stake in Rowes Wharf, an office and hotel property also based in Boston to Morgan Stanley MS which is an existing stakeholder in the property.

Blackstone currently carries a Zacks Rank #3 (Hold).

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