Anyone looking for signs that the commercial real estate market has turned the corner should take note: Blackstone has been snapping up properties in recent months.
In real estate Blackstone has been an adroit market timer. It offloaded tens of billions of dollars of properties shortly before the bubble burst in 2007-2008, then stood pat for two years as values plunged. Now, it has jumped back in with a vengeance. It is even buying properties it once owned.
In mid-October Blackstone and two other investment firms, Paulson & Co. and Centerbridge Partners, bought hotel chain Extended Stay out of bankruptcy for $3.9 billion and then inked a deal to take over a portfolio of 180 industrial warehouses from their over-extended owner, ProLogis, for $1 billion. Weeks earlier it snapped up $300 million of junk bonds in struggling Kentucky hotel operator Columbia Sussex. Those deals followed other two other recent investments by Blackstone in ailing property businesses.
Extended Stay and Columbia Sussex were familiar targets. Blackstone bought the former in 2004 and unloaded it for $8 billion in 2007, and it sold a group of 14 hotels to Columbia Sussex for $1.4 billion in 2006. Both sales fetched high prices — so high that the buyers got burned when the real estate market tanked. Now Blackstone is picking up the leavings.
Those weren’t Blackstone’s only deftly timed sales. In 2007 it bought the country’s biggest office-building owner, Equity Office Properties, for $39 billion. It then swiftly dealt away two-thirds of EOP’s assets at wildly high prices, thus shielding itself when property values tumbled soon after. Many of the buyers took a bath when the market turned.
Considering its record, Blackstone’s plunge back into commercial real estate is maybe as good a sign as any that the worse is over.
Blackstone watchers meanwhile are waiting to see if it will train it sights on other familiar prey: the wreckage of its EOP sell-off. So far it isn’t known to have targeted those leftovers. But if the past is any guide, chances are that it will.