Analysts Buzzing About GE Capital Acquisition

Gary Mozer, George Smith Partners

Analysts are still reeling from the surprising deal last week, which saw Blackstone and Wells Fargo acquiring $23 billion in assets from GE Capital.

“I think it makes sense because when you read all the press out there, GE wanted to get focused on manufacturing, so it made sense from their point of view,” Gary Mozer, George Smith Partners’ principal & managing director, told Commercial Property Executive. “From Wells Fargo’s point of view, they’re the 900-pound gorilla and have the ability to absorb this; they have a healthy balance sheet, they have the infrastructure and they’re one of the best merchant banks in the business.”

This was a deal that was something of a shock to most, with few seeing this coming. Mozer heard from industry insiders that the whole deal came down in three weeks with people working night and day to get it done quickly.

“This is a major step in our strategy to focus GE around its competitive advantages,” Jeffrey Immelt, GE’s CEO, said in a company statement. Immelt has gone on record saying his goal was to par GE Capital and increase its industrial side after the division’s lack of access to credit during the 2008 financial crisis put the parent company at risk.

The transaction will see Wells Fargo purchasing performing first mortgage commercial real estate loans valued at $9 billion in the United States, U.K. and Canada; Blackstone’s latest flagship global real estate fund, BREP VIII, has agreed to purchase the U.S. equity assets for $3.3 billion; and Blackstone’s European real estate fund, BREP Europe IV, has agreed to purchase the European equity real estate assets, for $2.01 billion.

Additionally, BXMT, Blackstone’s publicly traded commercial mortgage REIT, has agreed to purchase a $4.6 billion portfolio of first mortgage loans primarily in the U.S. with Wells Fargo providing the financing, and Multi BREDS, Blackstone’s real estate debt fund, has agreed to purchase performing first mortgage loans in Mexico and Australia for $4.2 billion.

According to Mozer, GE filled a niche in the commercial real estate industry and the deal takes out a major player, who was a very creative, tough and fair lender.

“They’re a great non-recourse lender, they price risk differently and are a great lender to do deals with,” Mozer concluded. “They were also focused on cash flow so they didn’t get tied up with appraisals. Because they weren’t regulated by banks, GE could always do a loan without an appraisal. We’re going to miss them as a lender in the community.”

For the transaction, Eastdil Secured/Wells Fargo Securities acted as advisor to Blackstone and Wells Fargo. Simpson Thacher & Bartlett L.L.P. acted as legal counsel to Blackstone and Dechert L.L.P. acted as legal counsel to Wells Fargo.