Blackstone won’t fail, but watch out for the Reits
Asset manager Blackstone defaulted on a bond it had issued. The bond had as underlying a portfolio of offices and shops owned by the Finnish company Sponda Oy. The official lawsuit declared by Blackstone it is the increase in European interest rates that has hit the value of real estate. The group tried to extend payment terms to the debtors but there was no way to convince them. It must be considered that Blackstone is not a provincial bank and its real estate business is one of the largest among western banks. Investors might think that Blackstone’s other real estate financial products, or any of its competitors, are at risk. Let’s do the math.
What are Reits
Blackstone has become the largest property owner in the West. Its activity can be traced back to the early 2000s. At the time, the bank’s real estate unit bought commercial space mainly offices and hotels. Over time, the real estate business has diversified to include shopping centers and e-commerce warehouses. Non recent times, especially after 2008, the bank’s attention has turned to the private sector: buying residential buildings and renting them out to private individuals. Blackstone’s business was not limited to the United States. Its penetration in Europe is significant, Sponda is just one of many. In Spain alone the group owned, in 2019, more than 30,000 homes rented mostly to middle-class citizens. To have financial vehicles that allow investors to benefit from real estate investments Blackstone (or other institutions) were created i REIT: Real Estate Investment Trust.
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