Blackstone encounters a "robbery" in real estate?
Blackstone is currently facing a default crisis due to its failure to repay a $275 million loan, involving the foreclosure of four Club Quarters hotels. Blackstone stated that it has transferred ownership of the hotels and claimed that the investment was fully written off four years ago, accounting for only 0.1% of its real estate asset management scale. The valuation of these four hotels has dropped from $423 million in 2017 to $320 million at the beginning of this year, a decrease of approximately 24%. Additionally, Blackstone was also involved in a default incident last year due to its failure to repay a $562 million commercial real estate loan
As the largest private equity giant on Wall Street and the world's largest alternative asset management company, Blackstone has recently found itself embroiled in a default controversy.
Reports indicate that Blackstone failed to repay a $275 million loan that has matured, putting four Club Quarters hotels it mortgaged at risk of foreclosure.
Blackstone responded by stating that it has not defaulted, and as part of the foreclosure process, it has transferred ownership of these hotels. Furthermore, this investment was fully written off four years ago, accounting for only 0.1% of Blackstone's real estate assets under management.
The decline in asset value may be one of the reasons Blackstone abandoned this transaction. In 2017, the valuation of the portfolio of these four hotels was $423 million, but by early this year, the valuation had shrunk to $320 million, a drop of about 24%.
This is not the first time Blackstone has been involved in a "default" incident.
In March of last year, Blackstone failed to repay a $562 million commercial mortgage-backed security (CMBS) that matured, with the underlying assets being a portfolio of 63 office and retail properties owned by a Finnish real estate company acquired by Blackstone in 2018.
The past two years have also been challenging for Blackstone.
Since the Federal Reserve's aggressive interest rate hikes in 2022, the world has entered a tightening cycle, and U.S. mortgage rates have rapidly increased, soaring from below 3% before the rate hike cycle began to nearly 7.8%, surpassing the highs seen during the subprime mortgage crisis.
With high borrowing costs, financing and purchasing demand in the U.S. real estate market has continued to cool, with price declines experienced across both residential and commercial real estate.
There are ongoing market concerns about the risk of defaults in commercial real estate. Has commercial real estate weathered the storm now?
