By Eliot Brown 

When Blackstone Group LP global head of real estate Jonathan Gray met with General Electric Co. executives in mid-March, they presented him with an urgent proposition: Buy our giant real-estate business, quickly.

Mr. Gray obliged.

The $23 billion deal with partner Wells Fargo & Co., announced by the three companies on Friday, illustrates Blackstone's position in the real-estate industry as the firm to call when it is time to unload tens of billions of dollars of property in one fell swoop.

The New York private-equity giant has long been friendly to big deals, most notably the 2007 leveraged buyouts of Hilton Worldwide Holdings and Sam Zell's Equity Office Properties Trust, the country's largest office landlord. But in recent years it has seen fundraising soar to the point where--before the GE deal--it had more than $28 billion in cash at its disposal to spend on real estate alone.

"Blackstone's scale in the real-estate space is unmatched," Stephen Ellis, an analyst at Morningstar Inc., said in a note to clients on Friday. "This type of scale provides Blackstone with deep insight into the market, letting it put more capital to work."

Blackstone, formed as a small advisory shop for corporate mergers and acquisitions three decades ago, has become enthralled with property. Real estate is the single largest profit generator for the firm, bringing in $1.9 billion of income in 2014 from investment returns and management fees.

The business has grown rapidly under Mr. Gray, aided by its relatively strong performance during the downturn, in part because it sold a lot of property just before the real-estate market turned and pumped in more money at the market's nadir. Given his record, Mr. Gray is seen by observers as an eventual prospect to become chief executive.

The GE deal comes just a few weeks after Blackstone finished fundraising for its $14.5 billion flagship property fund, the largest closed-end fund ever raised for real estate. Blackstone also raised the second-, third- and fourth-largest funds, according to industry tracker Prequin. Its closest private-equity competitors include Carlyle Group LP and KKR & Co., which also invest in real estate, but nowhere near the scale of Blackstone.

Aiding the firm is its wealth of specialized funds formed in recent years for property investments around the globe.

Blackstone is taking GE's $5.3 billion portfolio of office buildings and other properties spread through the U.S. and Europe, paid for with its flagship fund and a European fund. Those properties include a heavy concentration of suburban office buildings in Southern California, an area where Blackstone has been focusing, as well as midsize office buildings in the Seattle area and western Chicago suburbs.

In addition, of the $8.8 billion in property loans Blackstone is buying from GE, the firm's real-estate-focused debt fund is taking $4.2 billion of the loans, while Blackstone Mortgage Trust, a publicly traded company that Blackstone restructured in 2013, is buying $4.6 billion of the loans.

The remaining $9 billion in loans will go to Wells Fargo. Blackstone turned to the San Francisco-based bank, the largest commercial-property lender in the U.S., soon after meeting with GE, according to people familiar with the deal. Wells has been eager to expand in the industry and is helping to finance some of Blackstone's purchase.

A decade ago, the landscape was more diverse, filled with investment banks such as Morgan Stanley and Goldman Sachs Group Inc. But they pulled back after their property investments plunged in value in the downturn and regulators imposed tighter capital rules on real estate.

Today, Blackstone's competition comes mainly from companies such as Brookfield Asset Management Inc., a Toronto property giant that often joins with pension and sovereign-wealth funds for major deals, as it did in its recent buyout the Canary Wharf office district in London when it teamed with a Qatari fund.

Publicly traded real-estate investment trusts, too, have a great deal of firepower, including giants like Simon Property Group Inc., which recently tried to buy one of its largest competitors for more than $16 billion.

"If you are so much bigger than everyone else, you can really just write a check even with no financing to just make something happen," Steve Schwarzman, Blackstone's chief executive, said at a December investor conference. "If you're having a dialogue with a financial institution, it's almost like, 'Tell us how much you want to sell, we'll give you a price.' "

To be sure, real estate is inherently cyclical, and as the size of Blackstone's bets grows, observers wonder whether it can keep up its strong record in the next down cycle. In addition, Blackstone's size doesn't mean it can always buy properties at bargain-basement prices, however. The GE deal appears pricier than Blackstone's standard fare, at least by a commonly used measure, meaning it could be harder than usual to churn out profit or more likely to bring a loss if the market turns.

The annual income on the properties Blackstone is buying is about 6% of the purchase price, according to multiple people familiar with the deal. Typically, Blackstone targets investments with higher annual yields often running at least 7%--before taking on debt--but the strengthening real-estate market has made such deals harder to come by. As with bonds, prices of commercial real-estate deals fall as their yields rise.

The firm saw opportunity in the relatively high level of vacancy in the portfolio, which is more than 20%, as well as the vast size, according to a person familiar with the deal. Blackstone's shareholders appeared pleased with the deal. Its stock rose 2% on Friday to close at a record $40.02 a share.

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