LA Forum: Blackstone’s Nash sees more opportunities in debt

The chief investment officer of Blackstone Real Estate Debt Strategies says that, because of improving fundamentals, there’s good reason why more money is coming into the commercial real estate debt space.

Debt is still a very strong option for real estate investment firms, according to Michael Nash, senior managing director at The Blackstone Group and chief investment officer of Blackstone Real Estate Debt Strategies (BREDS). During an onstage interview at the PERE Global Investor Forum in Los Angeles on Tuesday, the Blackstone executive told delegates that the opportunity for investing in commercial real estate debt has not passed.

“Market conditions are better today than they were in ’09,” said Nash. “Capital today is balanced and well-priced, and I don’t think we’re close to a bubble yet. I would say it’s possible, but it’s not quite there yet.”

Nash also noted that, since the global financial crisis of 2008, the industry has seen a change in capital’s role in the market. “The reason why firms like ours are looking at debt is because we’re looking to fill a liquidity void left by the financial crisis,” he explained.

Indeed, Blackstone has been very active in the debt space of late, pursuing multiple strategies at once. Although Nash didn’t discuss it at the conference, PERE previously reported that the New York-based private equity and real estate giant is seeking $3 billion in equity for its real estate debt strategies fund, BREDS II. Blackstone also has been a large buyer in the CMBS market, and Nash mentioned that another strategy is to originate new loan products for the firm's clients. Last but not least, the firm also follows a strategy of buying legacy loans from financial institutions.

“There’s many ways to invest in debt,” Nash said. “You can just be a conventional lender, while others pursue distressed forms of debt investment.” Blackstone, however, tends to invest in distress not through its debt platform so much as through its global opportunity fund, Blackstone Real Estate Partners VII.

Nash pointed out that, on the debt side, Blackstone is “really just providing a liquidity solution for owners of real estate.” All told, because Blackstone currently sees fundamentals for commercial real estate as “good, stable and improving,” he told delegates that those fundamentals were contributing to not only more investment opportunities arising in the space but more investors seeking out said opportunities.

“Is there more capital today in the debt space? Yes,” said Nash. “Is it an interesting risk-reward paradigm for investors today? We at Blackstone still say yes.”