Blackstone Has Hope for the Office Real Estate Market
Blackstone’s BXMT mortgage trust, on the other hand, is buckling under the weight of a pile of office loans gone bad.
Sign up for smart news, insights, and analysis on the biggest financial stories of the day.
It was no doubt a tale of two divisions at Blackstone’s usual watering hole last night — one celebrating, one commiserating.
The festive ones were the Wall Street giant’s real estate dealmakers, who just closed an $8 billion funding round for its real estate arm earlier this month, and who, according to a Bloomberg report on Wednesday, see the office real estate sector as primed for a major turnaround. The ones drowning their sorrows were part of Blackstone’s mortgage trust, the publicly-traded real estate investment trust (REIT) that goes by the ticker BXMT, which is buckling under the weight of its office loans.
Return-to-Office Real Estate
Blackstone is essentially betting that the office real estate market has bottomed out. With a fresh $8 billion secured, the firm’s dealmakers say they are looking to be aggressive in Europe, North America, and Australia. Already the firm is circling a deal for a 50-story office building in midtown Manhattan and is looking to buy its first office building in London in over six years.
Textbook buying the dip. That’s great for dealmakers. For the BXMT team that has seen its portfolio battered and bruised by the major dip? Not so much:
- Last year, the fund posted its first full-year net loss since 2012, when Blackstone took it over, and its shares closed the year down 50% from a pandemic-era high.
- The loss mostly stems from the fund being unable to collect on some of its loans in full. Roughly 33% of the REIT is made up of office loans — more than half of which are watchlisted or impaired.
“The office loan exposure was the big overhang on their stock for about two years,” Harsh Hemnani, a senior analyst at real estate research firm Green Street, told Bloomberg.
CLOh No: Need more proof of office pain? BXMT is also moving to sell its first collateralized loan obligation since 2021. The $1 billion CLO will be backed by some 90 properties, roughly 85% of which are either apartments or hospitality or industrial properties, Bloomberg reported earlier this week. That’s a sharp contrast to its four most recent CLOs, which were all primarily backed by office real estate loans.
