Blackstone Group LP agreed to buy 32 multifamily properties for about $2 billion from Greystar Real Estate Partners LLC as the private equity giant expands its push into the U.S. apartment market.
The buildings, with a total of 10,399 units, are spread throughout the country in states such as California, Florida, Washington and New York, Greystar said in a statement Tuesday. The Charleston, South Carolina-based company, the largest U.S. apartment manager, will continue to oversee the properties. Peter Rose, a Blackstone spokesman, declined to comment on the transaction.
Blackstone’s multifamily holdings are ballooning as values surge amid a shift away from homeownership and escalating rents. The Greystar purchase would give the world’s largest private equity firm control of 57,000 units, including the acquisition of more than 11,000 apartments at Manhattan’s Stuyvesant Town-Peter Cooper Village.
Multifamily buildings have led the five-year recovery in commercial real estate, with values exceeding the 2007 peak by about 34 percent, according to Moody’s Investors Service and Real Capital Analytics Inc. In big cities, prices are as much as 57 percent higher than prior records.
Greystar, founded by Chief Executive Officer Bob Faith in 1993, manages 400,000 units globally. The deal with Blackstone represents about a fifth of the roughly 55,000 units the company owns, Faith said in an interview. The apartments are in a mix of mid-rise, high-rise and garden-style buildings.
Property Upgrades
Greystar specializes in buying apartment properties in need of upgrades and refurbishing them to get higher rents, Faith said. The company started acquiring the buildings in the Blackstone deal in 2011, when it closed on a $600 million fund, he said.
“We executed most of our value-add strategy and felt it was time to take it to the market,” Faith said. Greystar capitalized “on the opportunity to take the whole portfolio out in one fell swoop. There is a lot of appetite for very high-quality multifamily properties.”
Blackstone started buying apartment buildings about two years ago after becoming one of the first Wall Street investors to break into the single-family rental business. The New York-based firm made its residential foray into Manhattan with a $690 million purchase in September, followed two months later by a $5.3 billion deal to acquire Stuyvesant Town, the city’s largest apartment complex.
Delaying Homeownership
The steep climb in commercial property prices — particularly in the multifamily segment — has sparked concern that the market has gotten overheated. Apartment-building values will hold steady because young adults are increasingly choosing to live in cities and delaying home purchases, Faith said.
“We have had a run, but I don’t think anybody has suspended the laws of supply and demand,” he said. “There are still a lot of good reasons to believe we’re going to continue to chug along in multifamily.”