General Electric is on the move to sell some or even all of its $30B real estate portfolio consisting of office buildings , apartment complexes, and commercial properties worldwide, reports The Wall Street Journal. The outlet notes that GE's potential buyers of these investments are Blackstone and Wells Fargo.
Take note that what GE offers is an investment portfolio and not buildings owned by the company in other regions. Rather, the $30B portfolio is mainly consisting of debt issued by property owners, clarifies The Wall Street Journal.
Thus, GE's move differs from recent news wherein Sears planned to reduce some of its real estate holdings and "spin" more than 200 stores off into a real estate investment trust (REIT), notes Forbes. What Sears would do is to "spin" or just sell and then lease them back from the new owner, adds the outlet. This spinning strategy is reportedly utilized lately by Hudson's Bay Co and MGM Resorts.
This is like selling a property to a new owner and renting it from the new owner again. Why? Sometimes, the company may feel that renting it may probably do more good for its business. In essence, that would give the company a more liquid cash flow for better investment channels or sometimes, to settle debts. In any business, cash is king.
Fortunately for GE, its reported plan on selling its real estate portfolio, especially its commercial real estate investments, may quickly yield positive results as commercial real estate is on the rise.
In another article by The Wall Street Journal, real estate research firm Green Street Advisors said that March commercial property values are 11 percent greater than last year's and 87 percent more since the lowest point in 2009. From 2007's peak, these values are more than 14 percent, based on the Green Street's index.
Growth is expected with the current low-interest rates and with "debt capital that is freely available, you have a recipe for further property appreciation." Peter Rothemund, an analyst at Green Street, told WSJ.
The Washington D.C.-based Urban Land Institute also forecasted good news for the industry. It says that commercial real estate will continue to rise through 2017, at least, informs The Dallas Morning News. Urban Land Institute's William Maher told the outlet that "Real estate pros predict three more years of smooth sailing for U.S. real estate."
In the case of GE, it plans to focus more on its sale of industrial products such as jet engines, generators, electric grid gear and oil field equipment, Reuters reports. This year, the outlet says that there's an indication that GE's industrial operations could post a conservative profit hike of 10 percent.
As of Dec 31 last year, GE's real estate portfolio is only about 7 percent of its total $499B assets, Reuters notes.
