A Flurry Of Real Estate Deals Suddenly Blanket NYC And New Jersey

Two major players in U.S. real estate: The Blackstone Group L.P. BX and Prologis Inc PLD are betting on New York City office and the New Jersey industrial market, respectively.

Blackstone's Largest Core Purchase

On February 11, The Wall Street Journal reported that Blackstone had struck a deal to acquire a ~50 percent interest in six major NYC buildings which are valued at ~$4 billion from private developer RXR Realty.

"The portfolio consists of six office buildings, including 340 Madison Ave., 620 Sixth Ave., 1330 Sixth Ave. and the iconic Starrett-Lehigh Building on Manhattan's West Side," according to the WSJ report.

Blackstone had raised $3.5 billion during 2014 for its Core Real Estate fund. This fund targets stabilized assets, in contrast to distressed real estate that requires the Blackstone "fix it" approach.

This is a highly scalable business with many synergies available from Blackstone's operation of similar assets. CEO Steve Schwarzman had previously predicted that this new core real fund could reach $100 billion in AUM in the next 10 years.

The core real estate fund has a longer time horizon than a typical Blackstone 10-year closed-end fund, lower targeted IRR hurdle rates, and a lower fee structure.

Blackstone had previously acquired 1740 Broadway in midtown Manhattan from Vornado Realty Trust for $605 million in one of its first core fund transactions last year.

Prologis New Jersey Expansion

Global logistics giant Prologis, Inc. also announced on February 11, the signing of a definitive agreement to acquire a portfolio of Class-A logistics and retail assets from Morris Realty Associates LLC, for an aggregate price of approximately $820 million.

Upon closing, Prologis will acquire a 100-percent occupied portfolio of 8 Class-A operating and development properties totaling 3.2 million square feet.

"Portfolios of this size, location and quality are extremely rare," said Nick Kittredge, president, Prologis East Region. "This off-market transaction follows a long-standing relationship with Morris. It will add state-of-the-art product to our portfolio in northern New Jersey and underscores the strength and appeal of our currency through our OP unit structure."