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July 24, 2015

Huge selloff of Eastside office buildings begins

Puget Sound Business Journal

Marc Stiles

Twenty suburban office buildings across the Eastside sold Thursday for a total of $208.4 million.

The upshot is that New York-based Blackstone Group LP is back as the landlord for many companies, including Genie Industries in Redmond and State Farm and T-Mobile in Bothell.

In addition, some employees of the seller, Arden Realty, are being laid off because Blackstone has hired a third-party company to manage the properties, according to a Kidder Mathew real estate broker. Arden is a GE Capital Real Estate company.

This was not unexpected. In April, Blackstone (NYSE: BX) and Wells Fargo (NYSE: WFC) announced that they had agreed to purchase most of the assets of GE Capital Real Estate in a global transaction valued at approximately $23 billion. A Blackstone fund agreed to pay a total of $3.3 billion for properties in the Puget Sound region, Southern California and Chicago.

The Eastside portfolio totals just over 2.3 million square feet of commercial space in 37 buildings, according to the Kidder broker, Dan Harden, who was not involved in the deal but has been tracking it. Public records show that 20 buildings sold Thursday.

Harden said Blackstone will retain some Arden employees, but not all because commercial real estate company CBRE (NYSE: CBG) is taking over management of the portfolio. CBRE officials could not be reached. Most of the properties that are changing hands are in Redmond but some are in Bothell.

"Tenant demand in Redmond is certainly coming back," Harden said. "Eighteen months ago this was a challenging market, and now it's beginning to have some success."

Blackstone briefly became the Puget Sound region's biggest office landlord in 2007, when it acquired prominent buildings in downtown Bellevue and Seattle, including the 76-story Columbia Center, as well as some suburban assets. This was part of a $39 billion acquisition of Equity Office Properties Trust debt assets across the country. But within weeks of completing the deal, Blackstone started flipping some properties, with Beacon Capital Partners buying many of the assets locally.

The properties that Blackstone is buying from GE are some or all of the buildings in business parks with similar sounding names: Willow Creek Corporate Center, Willows Commerce Park, Redmond East, Canyon Park Commons, Canyon Point, Canyon Park East, the Plaza East and North buildings, and the Canyon Park Office Center.

For the full story, go to Puget Sound Business Journal.

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