GE Capital Real Estate signs off $375m of loans as fate of staff remains uncertain

General Electric may be selling off its financial businesses, but its commercial real estate lending platform isn't slowing up yet. Despite uncertainty regarding the fate of its employees, GE Capital Real Estate provided at least $375m in commercial real estate loans this week.

GE’s real estate lending platform continued to close loans this week, ahead of completion of the sale of most of its real estate book to Wells Fargo and Blackstone, announced on 10 April.

With the fate of its employees still uncertain, GE Capital Real Estate provided at least $375m in commercial real estate loans to US clients.

That included a $325m, five-year, sub-3%, fixed rate loan for RXR Realty’s purchase of a 36-story office building called 32 Old Slip in Manhattan’s Financial District.

And a $50m, four-year loan for to Wildamere Properties for the purchase of the Plymouth Corporate Center in Plymouth, Minnesota.

Screenshot 2015-04-21 at 10.30.14 PMThat loan carries a 72% loan-to-value and an initial floating interest rate in the mid-3% range.

The deals were reflective of the formidable non-bank lender’s reputation for nimbly placing large loans across a variety of diverse asset types and markets.

Headed by president and CEO Alec Burger, GE Capital Real Estate had grown into a $34bn business by the end of last year.

In the Plymouth deal, GE offered a “flexible structure, future advances and aggressive pricing,” noted CBRE’s Murray Kornberg, part of the team that arranged the financing.

But these deals will have been agreed weeks before the 10 April announcement and now the fate of its hundreds of staff remains unclear.

General Electric seeks to exit commercial real estate lending completely by the end of 2015, a process that kicked off earlier this month when the firm announced it would sell the bulk of its real estate portfolio, including $18bn of property loans, to Blackstone and Wells Fargo.

That will lead to significant layoffs, sources told Real Estate Capital.

“It’s highly unlikely they’ll need all these people at Blackstone and Wells,” said one executive who works for a GE partner. “There will be synergy savings and headcount reductions; that’s a certainty. It will be large because Blackstone and Wells Fargo are fully staffed.”

General Electric likely factored severance payouts into the $16bn it attributed to restructuring costs, the source suggested.

But another source familiar with Blackstone and Wells’ strategy claimed the firms are both able and willing to recruit top talent, though refusing to give numbers.

“There’s some talent there and good people,” he said. “We will augment our teams, both Blackstone and Wells, if we can convince them of the merits. There’s definitely a need, but it’s too early to tell. We’d like to hire people.”

Top GE executives have claimed that returns on lending were not good enough for its investors compared with its “leading high-tech industrial business.”

As it exists its financial businesses, the corporation expects more than 90% of earnings to come from its industrial businesses by 2018.

 


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