Behind Douglas Emmett’s quest for LA office trophies

DEI, in partnership with QIA, plans to vie for last of Blackstone portfolio: Jordan Kaplan

May.May 04, 2017 03:45 PM
From left, Sheikh Abdullah bin Mohammed bin Saud Al Thani of QIA, Jonathan Gray of Blackstone, Jordan Kaplan of DEI and 1299 Ocean (Getty)

With its recent acquisitions of 1299 Ocean Avenue and 429 Santa Monica Boulevard, Douglas Emmett now controls more than 70 percent of Santa Monica’s office supply — but its competitors did not go down without a fight.

Speaking on a first quarter earnings call this week, CEO Jordan Kaplan said the bidding for those properties was fiercer than ever, despite his company’s dominance in the market.

“I hope … we’re scaring people out of the market, but so far, I haven’t felt that,” he said. “The bidding is intense and my hair goes a little grayer….There doesn’t seem to be any free ride. Hopefully, people are getting the word that it’s hard to compete with the L.A. local group that already has its platforms in place.”

Kaplan jokingly cautioned his rivals: “Other landlords take note — get out of our way!”

The company also provided some insight into its partnership with the Qatar Investment Authority, with which it partnered to buy the properties from Blackstone — for a combined $352.8 million. The partners also joined forces to buy a 1.73 million-square-foot Westwood office portfolio for $1.34 billion in March 2016. Both deals were part of Blackstone’s sell-off of its massive Equity Office portfolio.

Kaplan said DEI first got together with the sovereign wealth fund to buy all of the Blackstone buildings en masse, but amended their deal when Blackstone decided to roll out properties one at time instead. He also noted that there are other undisclosed partners in the deal in addition to QIA.

For its part, QIA seems to want to bag all the Blackstone properties.

“They said, ‘Okay, it’s going one at a time, we’ll do it one at a time, we’re ready to do the whole thing,'” Kaplan recalled. “And I said, ‘I’ll tell you what, we’ll set this up and I’ll give you the best opportunity to buy these buildings, even though they’re going one at a time. I can’t promise you anymore that we’ll get them all because we can’t get them all at once. But you’ll have the best opportunity to get these buildings that can be given.”

As a result, DE seems destined to bid on the remainder of the Blackstone portfolio, which still includes buildings like 9655 Wilshire in Beverly Hills. Blackstone recently began quietly marketing that property, sources told The Real Deal.

“As that list of buildings has been coming out, it’s not a question of should we do it here or there, that’s our commitment to them,” Kaplan said.

DEI, which has a 20 percent stake in its deals with QIA, plans to maintain that stake even as the footprint expands.

“In our original deal, we weren’t going to go below 20 percent and we’re not willing to go below 20 percent,” Kaplan said. “We’d like to have more, too.”

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