General Electric is close to sell its huge real estate portfolio in a sale that could fetch about US $30 billion, reports said on Thursday. The move is expected to the biggest move so far for GE’s chief executive, Jeffrey R. Immelt as he tries to reshape the company on its core industrial businesses and reduce its exposure to financial services.
The deal aims to cut down GE Capital, the company’s underperforming financial services arm, which holds most of a portfolio that covers apartments, offices and other commercial sites. GE Capital, which holds nearly $500 billion in assets, had brilliantly made use of financial innovation in the time period leading up to the 2008 crisis to improve returns at both of its industrial operations and those of others, but it has fought harder to adapt to the post-crisis environment. The company has already reducing its real estate portfolio when it sold 350 properties worth about US$2.1 billion.
Two top financial institutions – Blackstone and Wells Fargo are getting ready to buy most of the portfolio, that consists of office and apartment buildings as well as substantial loans, these people said. The deal is expected to be announced today.
Detail and facts of the transaction were not immediately available which includes the price, segregating the assets brought by Blackstone and Wells Fargo and whether any other buyers are also involved in buying substantial assets from GE.
In the start of the year, the real estate assets were valued at US$34 billion by the company, which was 11% lesser than the previous year. About US$9 billion of that was equity in various companies, almost a third less than the previous year. The portfolio generated an increase of %134 at net income of US$299 million.
On the other hand, Blackstone is doubling down its real estate. It recently raised a real estate fund of US$14.5 in late 2013, bought the big hotel chain Hilton Worldwide public after buying it in 2007 and turning it around.
Its highly likely for the GE’s commercial real estate loans to be acquired by Wells Fargo for Wells is already the largest commercial real estate lender in the United States, providing financing for everything from office buildings to homebuilders. Recently, Well Fargo has widen its commercial real estate reach overseas, part of a broad effort to broaden the bank’s focus, which is very much centered on the United States. The company acquired US$6.05 million in commercial real estate across Britain, with more focus in London in 2013. It has been noted by the company that Europe and Canada are two particular growth areas for the bank’s real estate business.
Measures are being taken by GE to reduce its exposure to financing operations. Last month, it gave away its consumer lending business in Australia and New Zealand for about US$6.3 billion. It spun off its retail business Synchrony last July, through an initial public offering. In the same year, it sold its Scandinavian consumer finance operations to Banco Santander. At the same time, its expanding its industrial and technological operations. Last year, it won contentious aution process for the energy assets of Alstom, the French industrial company which it has been expanding into big data, on a hope to enter the market of the so-called Intern of Things.
These efforts of the company have improved the financial performance of the company. In the last quarter, revenue rose 4% to US$42 billion, as Immelt pursued what he has called a big ‘pivot’ for one of the country’s last true multinational company.
Anyhow, the deal has been reported to be nearing and when asked about it to all the three companies, they denied to comment.