Blackstone Group LP is in advanced discussions to sell four Los Angeles office towers for significantly more than $1 billion to a group led by West Coast landlord Douglas Emmett Inc., according to people familiar with the talks.
The deal, if completed, would be one of the largest office sales in Los Angeles in recent years and would mark a significant expansion by Douglas Emmett, one of the biggest office landlords on the West Coast.
Executives of Douglas Emmett, a real-estate investment trust that went public in 2006, have long craved the Blackstone-owned buildings, repeatedly telling investors they wanted to own the private equity giant’s properties in the area.
The buildings being sold are four towers with a combined 1.7 million square feet in the Westwood section of Los Angeles, an area in the western part of the city that commands relatively high office rents, though less than top neighborhoods like Beverly Hills or Santa Monica.
For Blackstone, the buildings are some of the final remnants of its property buying spree in 2006 and 2007. Three of the towers—10880, 10940 and 10960 Wilshire Boulevard—were part of the company’s $39 billion buyout of Equity Office Properties Trust in 2007.
Blackstone sold much of the portfolio immediately to other buyers willing to pay top dollar. But the firm held on to the Westwood properties, among others, through the recession.
Santa Monica, Calif.-based Douglas Emmett has at least one partner on the purchase, according to multiple people briefed on the talks, but the identity couldn’t be learned. Jordan Kaplan, the company’s chief executive, had said on an earnings call earlier this month that “on a larger deal…we would put in maybe 15 percent to 20 percent of the money,” according to a transcript.
Douglas Emmett would be running against a trend set by many of its competitors. Publicly traded landlords have been avoiding acquisitions of well-leased properties at a time when sovereign-wealth funds and other investors have been willing to pay substantially higher prices. But Douglas Emmett appears to have outmaneuvered some of these private players, including Donald Bren’s Irvine Cos. and Canadian pension investor Ivanhoe Cambridge, both of which bid on the properties, according to a person familiar with the matter.
The buildings are expected to produce about $51 million of income this year and are about 87% occupied, according to marketing materials from Eastdil Secured LLC, a real-estate services firm that is representing Blackstone in the sale. Tenants include the University of California Los Angeles, CBS and the federal government, according to the materials.
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