Blackstone strikes biggest European RE deal of 2016 with $3.6B OfficeFirst buy

Fund manager to acquire 97 properties and 15M sf in Germany
November 08, 2016 03:36PM

OfficeFirst Property The Square in Frankfurt (Credit: OfficeFirst) and Blackstone's Jonathan Gray

The Square in Frankfurt (Credit: OfficeFirst) and Blackstone’s Jonathan Gray

In Europe’s largest property deal this year, private equity giant Blackstone Group has agreed to pay $3.6 billion for OfficeFirst, the real estate subsidiary of Germany’s IVG Immobilien AG.

Last month, IVG — which is one of Germany’s largest property companies — gave up on an initial public offering of OfficeFirst because of investor concerns about market volatility. The company then turned down a private sale offer from Blackstone TRData LogoTINY, which raised the ire of the roughly 30 hedge funds that own it, the Wall Street Journal reported.

But on Tuesday, the two companies reached an agreement. The terms are similar to Blackstone’s offer last month, according to the Journal. Blackstone will pay around 22 euros (roughly $24 USD) per share, Reuters reported.

OfficeFirst has 97 properties worth around 1.3 billion euros, the Journal reported. The deal will add 15 million square feet of mainly office space across six major cities, including Berlin and Frankfurt, to Blackstone’s global portfolio.

In an earnings presentation last month, Blackstone told analysts that its dry powder crossed the $100 billion threshold for the first time. Due to inflated asset prices and interest rates at record lows, Blackstone had difficulty finding highly attractive investments that could yield double-digit returns for its customers.

The company sold $7.2 billion worth of real estate last quarter, thanks largely to the $6.5 billion sale of Strategic Hotels & Resorts to Anbnag Insurance. [WSJ]Miriam Hall