$1.8 Billion U.S. Property Deal Lost by Goldman Sachs: Reports

The Blackstone Group LP to prevail with a $1.8 billion deal for Alecta’s U.S. real estate sale, after Goldman Sachs Group Inc., which was the original winner of the sale, managed to goof up the transaction due to a disagreement over terms, Bloomberg reported quoting sources and people with knowledge of the matter.

Goldman Sachs was given a short amount of time to do additional research on the U.S. and U.K. assets of the Swedish pension manager after initially being awarded the sale deal by the manager. The people, who asked not to be named because the transaction is private said that Alecta was prompted to agree to sell the U.S. buildings to Blackstone instead after during that period of about a week, a dispute arose with Goldman.

According to the people, Goldman Sachs will proceed with the purchase of Alecta’s U.K. assets. The sources added that the value of the U.K. properties is about $450 million.

There were no comments available from representatives of Goldman Sachs, Alecta and Blackstone. Jones Lang LaSalle Inc., the broker on the deal, also declined to comment.

Comprising mainly of retail and office buildings, the U.S. portfolio includes 22 properties across the country. Alecta had said in April that strong real estate markets made it a good time to sell and that the assets had performed well but were an “organizational anomaly” after the Stockholm-based Alecta hired Jones Lang in the same month to sell the properties.

One of the people with knowledge of the auction process said that a disagreement over the price of the assets may have originated from signs of slowing in the U.S. commercial real estate market after a six-year boom.

Since disbanding its Whitehall property funds, which were hit hard during the financial crisis, Goldman Sachs has been rebuilding its real estate business and the bid coincided with that effort by the bank. Goldman Sachs shifted its real estate focus to lending from buying properties after top executives of Whitehall left the firm.

Low-risk, stable, income-producing properties – the core real estate of the company was being expanded by the company in 2010. In 2013, and before bringing in Canadian pension fund Ivanhoe Cambridge as a third partner, Goldman Sachs and U.S. apartment developer and manager Greystar had teamed up and they together had expended about $1.5 billion to buy a group of residential complexes across the country.

For its second real estate credit pool at $4.2 billion for its second real estate credit pool at $4.2 billion, Goldman Sachs completed fundraising two years ago. It would look in the U.S. and Europe and would be “opportunistic” in investments, the firm at the time said.

An office building in Washington that was featured in President Barack Obama’s push to make commercial buildings more energy-efficient, two retail buildings housing Sephora and Disney stores on Chicago’s Magnificent Mile and high-quality shopping centers in California are among the properties that Blackstone, the biggest private equity investor in real estate, is now set to acquire.

Per Frennberg, chief investment officer of Alecta said that Alecta expects to complete the sale by the end of the year or in the first quarter of 2017.

(Adapted from Bloomberg)


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