Blackstone eyes European bank property sales

Blackstone is poised to pounce on commercial real estate assets being released by European banks and has $10.1 bn (EUR 7.3 bn) of 'dry powder' to invest property globally, president Tony James said during a conference call on the private equity company´s third quarter results.

A lot of assets, including real estate, are now being released by European banks at attractive prices, he said. 'However, banks in Europe are very tricky right now because it's hard to assess the quality of the assets, the likely regulatory regime and what government intervention they will need or get.'

Blackstone has raised $4 bn in the initial close of its latest property fund, BREF VII, and CEO Stephen Schwarzman said he expects this fund to be at least as big as the previous one ($10 bn). 'Conditions remain favourable given the distress in the system and we expect this to last for several years. Competition on new deals is limited and we have the largest pool of available capital in our asset class and can move quickly and certainty to close a deal,' Schwarzman said.

'While lending markets have tightened and CMBS activity continues to be constrained financing is available for prime assets and strong sponsors like ourselves,' he said.

Blackstone deployed EUR 1.8 bn from its funds during the third quarter, including $700 mln in Europe. 'Pressures on the financial system is leading to increased transactions activity and this is a new factor that the Europeans are really now starting to liquidate real estate assets,' Schwarzman said. 'This will be one of the most active investment years for us since we started real estate business 20 years ago.'

Blackstone has invested $1.4 bn in real estate since the end of Q3. Most of this was in the US, but Blackstone indicated it has a number of things ‘going on’ in Europe.

Blackstone invests in both real estate assets and debt.

Blackstone reported a $15.2 mln loss for the third quarter of 2011, compared with revenues of $257.8 mln for the third quarter of 2010. Real estate revenues for the first three months of 2001 came to $1.2 bn, compared with revenues of $618.4 mln in the same period of 2010.