Private-Equity Firm to Buy $800 Million more Commercial Property

Blackstone Doubles Down

Private-Equity Firm Set to Buy Another $800 Million of Commercial Property

Wall Street Journal | Commercial Real Estate
NOVEMBER 18, 2011

Blackstone Group LP is poised to acquire a portfolio of 16 office buildings in a deal that would value the properties at about $800 million, further cementing the private-equity group’s status as one of the world’s most aggressive buyers of commercial real estate.

The distressed portfolio of buildings in a half-dozen U.S. cities is currently owned by a Morgan Stanley real-estate fund that acquired them near the top of the market when it purchased Glenborough Realty Trust in 2006 in a $1.9 billion deal.

The acquisition would be the latest sign of the big bet Blackstone is making on commercial property at a time of growing unease about the global economy. While many investors have stuck to the sidelines, Blackstone’s funds have been buying up highly-leveraged properties that crumbled in value when the market collapsed.

Blackstone has $41 billion in real-estate assets under management and the firm has raised $4.6 billion for a new global property fund that is targeting $10 billion.

The firm was part of an investor group that purchased the hotel chain Extended Stay Inc. out of bankruptcy last year, and it recapitalized the bankrupt mall giant General Growth Properties Inc. Earlier this year, Blackstone paid $9.4 billion for the U.S. shopping center portfolio of Australia’s Centro Properties Group, which at the time had more than $8 billion in debt.

Blackstone executives believe commercial-real-estate values will rebound once the economy improves because there has been so little new development in recent years. Jonathan Gray, co-head of Blackstone’s real-estate group, said at a New York University conference on Thursday that despite weak U.S. economic growth, he believes the lack of new property supply has made the property outlook “better than people would expect.”

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