Prudential Financial Inc. (PRU:US)’s real estate unit bought seven Southern California office buildings from Blackstone Group LP (BX:US) for about $400 million, according to an executive with the division.
Prudential purchased the properties totaling 1.1 million square feet (104,000 square meters) on behalf of institutional investors, said Tim Hennessey, San Francisco-based managing director of Prudential Real Estate Investors. Three of the buildings are in Pasadena, near Los Angeles, and four are in the San Diego suburb of Sorrento Mesa.
“The acquisition is consistent with our core strategy of investing in high-barrier-to-entry office markets in Southern California at less than duplication cost,” Hennessey, who oversees the western U.S. region for Madison, New Jersey-based Prudential Real Estate Investors, said in a telephone interview.
New York-based Blackstone, the world’s largest manager of asset alternatives to traditional stocks and bonds, has been selling buildings acquired in its 2007 buyout of Equity Office Properties Trust and 2006 joint purchase of Trizec Properties Inc. as occupancies in the portfolio rise. That appeals to long-term investors who seek stable, income-producing assets.
Christine Anderson, a spokeswoman for Blackstone, declined to comment on the sale.
The purchase was done at a capitalization rate, a measure of investment yield, of about 5 percent, and an average price of about $360 a square foot, said a person with knowledge of the purchase who asked not to be identified because the terms are private. Eastdil Secured LLC brokered the sale.
The Pasadena properties total 502,000 square feet, the person said. The others, called Sorrento Towers, have about 618,000 square feet. The buildings are about 93 percent occupied, on average.
Blackstone, the No. 2 U.S. office landlord by square feet, plans to market other office buildings in California and Boston later this year, the person said. About 95 percent of the firm’s office holdings are in those two regions and New York.
Blackstone is selling stabilized real estate and buying other properties as it invests a $13.3 billion fund raised last year. The firm earlier this year bought four office buildings with about 500,000 square feet in Orange County, California, for about $105 million, the person said.
The firm has hired bankers to take public or sell several of its largest hotel and retail holdings as stocks rally. They include Hilton Worldwide Inc., its largest single investment to date, and assets from Equity Office, its second-biggest deal ever. The Pasadena office buildings were from the Equity Office deal, while Sorrento Towers came from the Trizec takeover, the person said.
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