Blackstone invests $4bn in real estate in past year

Despite some fears that transactions in 2011 will be “tougher” to find than 2010, Blackstone expects deal flow to increase in the coming 12 months as banks earn their way to health and start dealing with their balance sheets.

The Blackstone Group has invested $4 billion of equity in real estate deals in the last 12 months alone, the firm said today.

Targeting “broken” real estate opportunities such as the recapitalisations of General Growth Properties and Extended Stay and the acquisition of assets from the likes of ProLogis and British Land, the New York-based altneratives shop said it had invested a significant amount of equity from its property funds with expectations deal flow would rise in 2011.

Blackstone co-head of real estate Jonathan Gray, speaking at the annual NYU Schack conference, cautioned against fears the coming year could be “tough” in terms of transaction volume, arguing he was slightly more optimistic. Instead he said: “More transaction activity will emerge as the banks get better.”

The opportunity set going forward will be as interesting, if not more interesting, than we have seen in the last year or two.

Kelvin Davis, senior partner 
TPG Capital

Gray was one of five panelists to detail the pace of their investments in late 2009 and 2010. Bill Walton, managing member of The Rockpoint Group, said his firm had deployed $1.5 billion of equity over the last 14 months in 22 separate transactions. Meanwhile, Neil Bluhm, managing principal of Walton Street Capital, said the firm had invested almost $1 billion in the past year.

“There are going to be decent opportunities [in 2011] but there’s no questions prices are higher today than what they were a year ago,” Bluhm told the conference.

Walton said there were fears 2011 could get “harder’ in terms of deal flow, saying Rockpoint – which is believed to be preparing for the launch of a new real estate fund – had been “more active” since late 2009 than for several years prior. But he said: “It’s got more difficult lately,” adding that he didn’t expect Rockpoint to invest more than $1.5 billion of equity in 2011.

As debt availability improves competition for assets and pricing would increase, Kelvin Davis, senior partner at TPG Capital, said. But he noted: “The opportunity set going forward will be as interesting, if not more interesting, than we have seen in the last year or two.”

TPG was getting into real estate in a “meaningful way”, Davis explained, focusing primarily on non-performing and distressed loans. The firm participated in the Starwood Capital Group-led deal to acquire loans from the failed Corus bank, and Davis said it had recently negotiated several distressed loan pools from a large money centre and some small regional banks, as well as taking control of the Las Vegas Planet Hollywood casino for the equivalent of $250,000 a room.