Exclusive: Blackstone plots Broadgate stake sale

LONDON Thu Sep 15, 2011 5:56pm EDT

Stephen A. Schwarzman, Chairman, CEO and Co-Founder of the Blackstone Group, in a file photo. REUTERS/Shannon Stapleton

Stephen A. Schwarzman, Chairman, CEO and Co-Founder of the Blackstone Group, in a file photo.

Credit: Reuters/Shannon Stapleton

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LONDON (Reuters) - Blackstone Group (BX.N) is expected to sell its 50 percent equity stake in London's Broadgate development for up to 600 million pounds ($944 million) in 2012, possibly reaping an eight-fold return on investment, two sources said.

The U.S. private equity company, one of the largest property investors in the world, is in the early stages of garnering interest from selected global pension funds and at least one sovereign wealth fund, one source familiar with the matter said.

Swiss bank UBS (UBSN.VX)(UBS.N), which on Thursday said a trader had lost it about $2 billion in unauthorized deals, is the largest tenant in Broadgate, which Blackstone jointly owns with developer British Land (BLND.L).

If Blackstone achieved a price of 600 million pounds for its equity stake, it would value the whole Broadgate portfolio at about 3.1 billion pounds, including 1.9 billion pounds debt.

Blackstone bought its half share of the 30-acre site in London's City financial district from British Land in September 2009 for 77 million pounds, also taking on 987 million pounds of debt secured against the estate.

It was not immediately clear how the debt related to Broadgate would be dealt with in any deal.

Oxford Properties, the property arm of Canada's Ontario Municipal Employees Retirement System that is British Land's joint venture partner on the Cheesegrater tower in the City financial district, is mulling a bid, the first source said.

Other parties being sounded out include Norway's sovereign wealth fund, Malaysian pension fund EPF and South Korean pension fund NPS, the first source said.

No selling agent had been appointed for the stake sale, and no formal sale process had begun, the first source said.

Blackstone declined to comment.

British Land was not immediately available

for comment.

The site is British Land's largest asset and in its 2011 annual report, the top-tier real estate investment trust valued Broadgate at about 2.7 billion pounds, with debt of 1.9 billion pounds.

Owners of the best City property are increasingly looking to sell as commercial real estate values have risen for 25 consecutive months, gaining 17.7 percent, and potentially choppy economic times lay ahead, property brokers said.

Last week, German fund KanAm put a one billion pounds folio of four properties up for sale, including the London base of Deutsche Bank (DBKGn.DE). London's iconic Tower 42 skyscraper was put up for sale with a 290 million pound price tag on Wednesday.

UBS is building a 700,000 square feet office block in Broadgate after a bid by English Heritage to preserve buildings it is due to replace was rejected by the government in June.

The Broadgate development, which is adjacent to Liverpool Street train station, was built between 1984 and 2008.

The government's green light for the UBS scheme could prompt the start of the sale process now, a third source told Reuters.

Blackstone had $28 billion of fee-earning property assets under management at end-June. Its portfolio includes Hilton hotels and UK holiday resort operator Center Parcs. ($1 = 0.635 British Pounds)

(Reporting by Tom Bill)

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