Blackstone has taken a big hit to offload two 13-story office buildings in Santa Ana, CA, selling the 560K SF Griffin Towers office park to a joint venture of Barker Pacific Group (BPG) and Kingsbarn Realty Capital for $82M—36% less than the CRE giant paid for the Class A property in 2014.
Blackstone bought the Griffin Towers campus from Angelo Gordon and Lincoln Property Co. for $129M. The towers, located at 6 Hutton Centre Drive in Santa Ana, were built in 1987. The property, in proximity to John Wayne Airport near the 55 and 406 freeways, includes a fitness center and a six-story parking facility.
According to Newmark’s Q1 office market report for Orange County, the county’s vacancy rate hit 17.7% in the first quarter, the highest level since 2012.; Class A vacancy hit 22.8% in Q1, Newmark’s report said.
Newmark represented both parties in the Griffin Towers deal.
Blackstone told GlobeSt. the company has significantly reduced the office share of its portfolio since 2007, when it accounted for almost half of it.
“There is a massive bifurcation in real estate performance, and what you own matters, which is why US traditional office represents only -2% of our portfolio today versus nearly 50% in 2007,” the company said, in a statement provided to GlobeSt.
The move came two weeks after Moody’s downgraded the debt on a $271M Blackstone loan secured by 11 Manhattan multifamily buildings that moved into special servicing in January.
The loan is still current, but the portfolio’s “declining performance” has driven up the loan-to-value ratio, Moody’s said, in a report that found the debt is much greater than the apartment buildings are worth.
The floating-rate loan, issued in 2019, encompasses 637 units in buildings located in Chelsea, the Upper East Side and Midtown South. Trepp put the portfolio loan, current as of this month, on its watchlist in November.
Higher-than-expected expenditures and the floating-rate debt on the portfolio have created a cash flow shortage on the properties. A statement issued by Blackstone indicated the company is trying to restructure the financial package on the portfolio.
“We continue to focus on delivering the best-in-class experience for our residents while we work with our lenders on the capital structure. Rental housing remains a high conviction theme for us, including in New York City,” Blackstone said, in the statement.
The 2019 loan was originated by Morgan Stanley, with Mirae Asset Daewoo, an investment firm based in South Korea providing $93M in mezzanine debt. Blackstone acquired the portfolio in 2015 in a joint venture with Fairstead Capital from the Caiola family.
The loan on its multifamily portfolio is not the first Blackstone CMBS deal on a Manhattan asset to head for special servicing in recent months. Last year, the CRE giant handed the keys for 1740 Broadway, a 26-story office tower, after a $308M CMBS loan came due and was sent to special servicing.