SL Green Realty Corp., an affiliate of Blackstone Real Estate Partners VII, Gramercy Capital Corp. and Square Mile Capital Management LLC have announced a joint venture for the recapitalization of a 31-property, 4.5-million-square-foot office portfolio in Southern California.
The extended $678.8 million mortgage financing was led by New York Life Insurance Company, acting as its agent. DekaBank Deutsche Girozentrale, Westdeutsche ImmobilienBank AG, Muenchener Hypothekenbank eG and Wells Fargo BankTotal were the lenders. Financing on the portfolio after the recapitalization is $746.8 million.
Blackstone, now the majority owner of the venture, has invested about $85 million into the portfolio to deleverage and establish significant leasing and capital reserves. Equity Office Properties, a Blackstone affiliate, will be in charge of the management and leasing of the portfolio. It already has an existing 11.2-million-square-foot portfolio in Southern California.
The new portfolio comprises 59 buildings in Los Angeles, Orange County, San Diego and other locations. It includes assets such as the L.A. Corporate Center in Monterey Park, Skyview Center in Los Angeles, 350 South Beverly Drive in Beverly Hills and Carmel Valley Center in San Diego’s Del Mar Heights.
“We are excited about the opportunity to form a joint venture with such terrific partners, including SL Green, and to make an additional investment in high-quality office assets in Southern California,” said Jacob Werner, a principal in Blackstone’s real estate group. “We believe our investment of capital should allow the portfolio to fully benefit from the continued market recovery.”
“This recapitalization permits SL Green to retain upside in a portfolio that will enjoy the benefits of professional management, capital for leasing and an improving Southern California office marketplace,” David Schonbraun, SL Green’s co-chief investment officer, said. “We believe that with the experienced management of Equity Office, a company with years of experience in Southern California, this portfolio is primed for a rebound. The fact that more than a half-dozen expert equity and debt investors agree, and have come together to make substantial financial commitments, speaks volumes about their confidence as well. SL Green is now well positioned to recoup its original investment in full, and to benefit from the anticipated upside as well.”