Blackstone Inc., the leading global alternative asset manager, has defaulted on a $562.5 million loan secured against a portfolio of secondary European properties owned by the company. This follows rumblings on Capitol Hill indicating that Uncle Sam may give BX shareholders a huge gift.
The loan, which was taken out in June 2015, was for €297M ($315M, £267M), and was due for repayment on October 31st, 2020. The default has caused a crisis for the lender, Silvergate Capital.
The prospectus for the now-defaulted commercial mortgage-backed security extolled the central location and tenants of its top European properties, including a shopping center in Portugal, a mixed-use development in Sweden, and a retail center in the Netherlands.
The Blackstone Group is one of the world’s largest asset management firms, with more than $500 billion in assets under management. The company is also a prolific real estate investor, with a portfolio of more than $100 billion in real estate investments around the world.
The default on the loan is a sign of the increasing risk of investing in real estate, particularly in Europe. The Blackstone Group has been expanding its European real estate investments in recent years, and the default may be a sign of more trouble to come.
The default is also a sign of the increasing risk posed by private credit. Private credit firms are racing to win debt deals that fund leveraged buyouts, and this is proving to be a risk business.
In addition to the default on the loan, Blackstone Inc. has recently been hit with a snag on a Finnish CMBS. The snag is related to a dispute between the company and a lender over the terms of the loan.
The dispute is the latest in a series of troubles for Blackstone Inc., which has also been dealing with a foul-smelling sewage spill into the Blackstone River from the Woonsocket Regional Wastewater Treatment Facility.
Digbee Limited founder and CEO Jamie Strauss and Blackstone Minerals Ltd (ASX:BSX, OTCQX:BLSTF) managing director Scott Williamson have spoken to the media about the sewage spill, noting that the company is working to restore the river to its original condition.
Overall, the recent financial troubles experienced by Blackstone Inc. demonstrate the increasing risk of investing in real estate and private credit. With the company now defaulting on a loan and facing a snag in a Finnish CMBS, investors should take note and proceed with caution.
