Blackstone Spreads Out in Europe - Analyst Blog

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Recently , The Blackstone Group LP ( BX ) entered the London real-estate market by acquiring the high profile Devonshire office and retail complex from Rockpoint and Abu Dhabi Investment Authority (ADIA). For the property, Blackstone paid £340 million ($540 million approximately), which is substantially lower than what was shelled out by Rockpoint and ADIA during the property market boom in 2006

Blackstone will finance the acquisition by obtaining a five-year senior loan of £210 million from The Goldman Sachs Group, Inc. ( GS ). Goldman had offered competitive price as well as there was no prepayment clause, which will enable Blackstone to keep the property for five years or sell it within this time without facing any penalty charge.

Rockpoint and ADIA sold the Devonshire property incurring significant losses. The reasons behind the lower sale proceeds were attributed to a weak property market as well as the vendor's unfavorable debt position along with  the fine negotiating ability of  Blackstone.

Besides London, Blackstone has acquired StarHub Green project, a 400,000 square feet property in Singapore, from SEB Asset Management, a German company. For this, Blackstone paid around $173 million (S$215 million).

Earnings Recap

Last month, the Blackstone Group reported its first quarter 2012 economic net income (ENI) of 39 cents per share, missing the Zacks Consensus Estimate by 3 cents. This compared unfavorably with the year-ago quarter earnings of 51 cents.

Results of the company were negatively impacted due to the shrinking top line, which was, to some extent, mitigated by lower expenses. Despite the unsatisfactory results, significant improvement in assets under management was a huge relief.

Conclusion

This acquisition will enable Blackstone to further expand its presence on the European soil and enrich its real estate portfolio. Moreover, it has also facilitated a change of strategy for Blackstone, which was involved in buying distressed properties from the European banks. Blackstone plans to revamp the property and find new occupants, to generate good returns.

Currently, Blackstone retains a Zacks #3 Rank, which translates into a short-term Hold rating.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ADIA , BX , ENI , GS

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