Signs of the impending collapse are everywhere. And many of those dark clouds seem to hover above the Blackstone Group. Steven Schwarzman's birthday party? Obviously the kind of excess and hubris that the Gods will not tolerate. Blackstone's $39.2 billion purchase of Equity Office Properties. Clearly things have gone so far. A bad moon rising.
At least, that seems to be the official theme of the business press lately. But how bad is Blackstone doing with it's EOP deal? Sure there are lots of signs of trouble in the real estate market. And REIT yields are down. But Blackstone didn't get to be Blackstone by blowing in the macro-economic winds. And, so far, it seems to be doing very well with its EOP deal.
Let's do the math. Blackstone's EOP properties have been selling like hotcakes (whatever "hotcakes" are). Fortune has the figures:
California's Irvine Co. is the latest buyer, picking up 17-buildings in San Diego County for an undisclosed amount of money. Macklowe bought eight Manhattan buildings for $7 billion the day the EOP deal closed; Beacon Capital Partners bought properties in Washington and Seattle for $6.35 billion. Bloomberg reports that San Francisco-based Shorenstein bought buildings in Portland, Oregon for $1.2 billion, and rumors abound in the Sacramento market that Shorenstein will buy EOP holdings there as well
Add to that todays announcement that Maguire Properties Inc. was buying EOP properties in Los Angeles and Orange Country for $2.88 billion. So that's at least least $17.43 billion that Blackstone has already pushed off its books. Let's call it $20 billion with the Sacramento and San Diego Country properties. Which means that Blackstone only has somewhere in the neighborhood of $19.2 billion left to clear before it starts making money from the EOP deal. Got that? The Blackstoners have already made back half their investment. And, since we don't know the exact mix of debt and equity involved in the deals described, it's possible that the picture is even prettier than this.
So it might be a bit early to start ringing the alarm bells of "excess" or writing that the size of Blackstone's deals and parties "bodes ill." Right now, things seem to be boding quite well.
Questioning Blackstone's big deal [Fortune via CnnMoney.com]
Maguire to buy ex-EOP property from Blackstone [Reuters]