Blackstone mulls buying back 'distressed property'

US private equity firm Blackstone is considering buying back some of the commercial property assets it sold at the height of the real estate market last year. Blackstone has the opportunity of re-acquiring the properties at 'distressed prices' now that the market has turned.

Blackstone outlined the idea to profit from the credit crunch as the company reported a loss of $66.5mln (EUR 42mln) for the first quarter of 2008. Blackstone made a $838mln profit in the same period last year. Blackstone's president Hamilton James said during a conference call that he was not certain the recent improvement in the credit markets would last. 'It's not clear to me whether it's a permanent upswing from here, as I think many of the banks are saying, or whether it's the eye of the hurricane.'

But he said that Blackstone sees an opportunity arising from its involvement in the largest real estate deal in history. The firm acquired Sam Zell's Equity Office Properties (EOP) trust for $36bn in late 2006. It sold many of the assets for a total of $28bn in the following months. Some of the buyers acquired blocks of EOP's properties from Blackstone using short-term debt. The onset of the credit crisis has forced many of these buyers to seek a quick sale to repaid the loans. Blackstone - which recently raised $10.9bn for a real estate fund - is waiting in the wings to re-acquire the properties at distressed prices.

'We see an attractive opportunity from the distressed sale of real estate, where leverage is already in place,' James said. Blackstone may buy properties back or invest in the debt used to finance the deals.