Blackstone Group LP (BX), the biggest private-equity firm, expects more deals in distressed U.S. commercial real estate and says European banks starting to sell troubled property assets present a “sizable” opportunity.
“In the U.S. today I think it’s still a fairly target-rich environment because a lot of assets need to be recapitalized, fixed,” Jonathan Gray, a co-head of the firm’s real estate business, said today at a conference in New York. “The fundamentals are getting better. We still have headwinds because of the economy not growing as fast as it should be, but overall I think it’s better than people expect.”
Blackstone, based in New York, has invested about $10 billion equity in real estate since September 2009, Gray said. The firm is targeting hotels and office buildings financed at high leverage during the 2005 to 2007 market surge, because some distressed properties can be bought for less than replacement costs, “fixed” and later sold for a profit, he said at New York University’s International Hospitality Industry Investment Conference.
Economic and job growth coupled with little new supply since financing dried up several years ago is helping U.S. commercial real estate recover, Gray said. The next opportunity is Europe, where banks have lagged behind the U.S. in selling troubled loans, he said.
“In the U.S., the big banks have pretty much cleared out a large portion of their distressed assets,” Gray said. “In Europe, it’s just starting. It’s not just assets in Europe, they also own assets here and in Asia as well.”
Gray said he sees “more opportunity” in real estate private equity than in corporate buyouts, where competition for deals is stronger.
To contact the reporter on this story: Beth Jinks New York at firstname.lastname@example.org
To contact the editor responsible for this story: Christian Baumgaertel at email@example.com