Start Of The End? Blackstone Sells California Commercial Buildings At 36% Loss

In the face of mounting office market headwinds, Blackstone Inc.’s (NYSE: BX) has liquidated two 13-story buildings in Southern California at a significant discount.

A joint venture between Barker Pacific Group (BPG) and Kingsbarn Realty Capital paid $82 million, or $146 per square foot, for the Griffin Towers office park in Santa Ana, California, in Orange County.

In 2014, Blackstone paid $129 million for the property from Angelo Gordon and Lincoln Property Company, representing a 36% loss on the sale of the property for the group.

According to public records, the office towers also previously sold for $89.9 million in 2010 and $183.8 million in 2007, meaning the latest sale represents the lowest valuation.

The recent drop in tenant demand and overall market instability has harmed the region’s office properties substantially. According to a Newmark analysis, Orange County’s vacancy rate reached an 11-year high of 17.7 percent in the first quarter, with Class A vacancy reaching 22.8 percent.

This is not the first Orange County building sold at a loss this year. LaSalle Investment Management sold in March an office facility in the area for 55% less than what it paid for it in 2019.

According to public documents, the investment business sold for $24.9 million the 4 Hutton Centre Drive, a 217,000-square-foot property in Santa Ana’s South Coast Metro district, or nearly $115 per square foot. LaSalle purchased the building in 2019 for $55.4 million, or $255 per square foot.

The South Coast Metro property is currently 57% vacant, which could explain why the property’s value has declined over the last four years.

“While there are market challenges for owners of office buildings, we believe in the future of high-quality office environments with great locations and robust amenities, which Griffin Towers offers its tenants,” BPG’s Mark Handin said in a statement.

Blackstone is among the real estate giants that are experiencing the windfall of the increasing interest rates. In December, the firm announced that its $50-billion Blackstone Private Credit Fund has reached its pre-set withdrawal limit for the first time, just weeks after its $69-billion real estate fund also exceeded its limitations for the quarter.

The economic environment is also affecting investment trusts as Slate Office REIT and True North Commercial REIT just recently announced major slashes in their dividends at 70% and 50%, respectively.

Blackstone last traded at $82.19 on the NYSE.

Information for this briefing was found via Commercial Observer, The Real Deal, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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