Blackstone Group LP, the famous property firm, is reportedly selling a portfolio of office buildings in Boston to an investor group led by Oxford Properties for $2.1 billion.
Details of the transaction have been kept under wraps, but sources told Bloomberg that the portfolio is made up of office buildings spanning an area of almost 3.3 million square feet - located mostly in downtown Boston. The sale marks the largest U.S. office property deal for the company.
News of Blackstone negotiating a commercial property deal broke in April 2014. It was reported that the company wanted to unload six prime office buildings in downtown Boston. The buildings include 1 Memorial Drive near Microsoft's New England Research and Development Center and 225 Franklin Street.
Blackstone is looking to dissolve most of its Boston-area office buildings that it acquired after taking over Equity Properties Office Trust in 2007 for $36 billion. The deal was the largest leveraged buyout ever at that time, according to The New York Times.
According to the Wall Street Journal, Blackstone is shedding its office property portfolio in small portions because it believes that the value of office property brand matters less in the office real estate market. Comparing office assets to hotel properties, Blackstone President Hamilton James told the Journal in an October investor call:
"If it's a hotel chain, it's going to be a business. If it's a collection of offices, it probably is more apt to be either individual properties or properties lumped regionally or locally, or by type."
While Blackstone is disposing of its office properties in Boston, it is buying up hotel properties. It recently invested $1.73 billion on the Cosmopolitan Hotel in Las Vegas. Blackstone is one of the biggest purchasers of hotel properties in Vegas. It owns the Hilton hotel there, which it bought for $26 billion in 2007.
By the end of 2013, Blackstone had about $80 billion in total real estate assets, reports Forbes.
On the other hand, Oxford Properties - the real estate arm of Ontario Municipal Employees Retirement System - oversees about $20 billion of assets. It has about 50 million square feet of office, industrial, retail, hotel properties and apartments in the U.K., U.S. and Canada, reports Bloomberg.
