And the Winner is...

Blackstone, in a bid to spread it's real-estate hegemony to multiple continents and asset classes has made Jonathan Gray a busy man.  Going long and strong real-estate, whether residential or commercial, has been a no-brainer since 2009 but much credit needs to be given to Jon Gray and his crew.  Actually,  the media has been covering his situation pretty thoroughly for a while now so The CRE Review is going to do a synopsis covering Blackstone's dominance in this area.

 Before we get started, here are some overviews of JG that are worth familiarizing yourself with.

1. Jonathan Gray, Blackstone’s Real Estate Wizard Behind the Curtain - New York Observer
2. Jon Gray Skips Party, Afraid Record Buyout Will Fail - Bloomberg
3. Blackstone's Gray Joins Board as Real Estate Rises to 71% of Firm's Profit - Businessweek 

Whether it has been getting involved in GGP's bankruptcy, loaning money to and then owning  Eagle Hospitality (Apollo and preferred shareholders got spanked on this one; more on this story another time), buying Centro, or any other (Emeritus' health-care portfolio) of it's lucrative joint-ventures (Glimcher); Blackstone has acquired an empire that spans beyond commercial buildings.

Jon Gray has also been busy acquiring a massive portfolio of residential houses; often times he is buying them in bulk.  Look no further than the mortgage team at Bloomberg and you will frequently see BX named in a story that excessively celebrates the genius of buying resi when it has never made more sense to do so.

1. Blackstone Sees Two-Year Window to Buy Houses: Mortgages - Bloomberg
2. Phoenix Picked Clean, Private Equity Descends on Atlanta - Bloomberg 
3. Blackstone Makes Foray Into Houses for Rent: Mortgages - Bloomberg
4. Blackstone Rushes $2.5 Billion Purchase as Homes Rise - Bloomberg

See what I'm saying here?   While not every purchase has been a winner (see: EOP restructurings, Hilton buyout), their aptitude to see trends just a few months before anyone (lol) else tells me that leaving the keys in the mail is just the price of doing business on such a massive scale. 

In case you haven't learned enough already.  A couple more to drive the point home.

1. The Hotel Hegemony Continues
1. Blackstone Said to Seek $450 Million for Hotel Financing - Bloomberg
2. Blackstone Said to Plan Sale of Miami Beach Resort - Bloomberg
3. Blackstone/Apple REIT Merger Signals New Wave of Private Equity Hotel Investment - CoStar

Maybe in the future we'll do a similar story on CRE investors who recently got it all wrong.  Any ideas?  Maguire, Lightstone, Macklowe might work.  Let us know.

~Jingle Male

510 Madison trades at $1,000 psf

BXP buys from Macklowe the WSJ reports. On the one hand, that's the richest price we've seen since this little journey into the fourth circle of our own little CRE inferno, but at the same time BXP speculates in the article that Macklowe probably lost all his equity and they're basically buying the debt.

EQR buys luxury Washington Apartments @ $343 per square

Sorry no link.

EQR buys 425 Mass (fka Dumont) for $167mm from Broadway. 559 units.

This follows the two NYC apartment purchases earlier this year, and an in place agreement to pick up a third one from Macklowe.

Macklowe - The Otera Catalyst

Macklowe is making a last ditch effort to save 1330 Ave of the Americas, which he effectively lost to Otera last month in the foreclosure auction. The play is to bring an equity partner and avoid the $12 mm in transfer tax costs. Macklowe and JV would pay Otera ~50% of their investment, the other mezz holders are already gone, and the taxpayer doesn't get the transfer tax (which seems grossly unfair, but that's another story). It's interesting how the foreclosure could actually end up benefiting Macklowe, even if he ends up a bit diluted given how much he put aside for renovations and whatnot.

Macklow has problems all over. He obviously overpaid for the EOP properties and lost GM and a number of other properties in that debacle, but he also has tenants fleeing (including 1330 AoA which has a 66.1% occupancy), and plummeting lease rates.

510 Madison was damaged by fire in February, and now two major tenants that were coming into the still-under-the-shovel building are trying to break their lease and recoup deposits. Tourneu had initially agreed to lease the ground floor retail space (3300 sq. ft.) and Jay Goldman & Co. had plans to lease the 19th floor of the 30 floor building.

Macklowe's 1330 AoA Seized

1330 Seized

Update:
The property is encumbered with a senior mortgage and mezzanine debt held by Otera (a unit of Caisse de dépôt et placement du Québec). So the term "auction" is used lightly - much like John Hancock tower earlier this month, there was likely one bidder and a distressed/non-market price, essentially held just to transfer control to the appropriate party. On the other hand, REFI implied nearly two months ago, that Otera had hired Eastdil to market the property for sale, so it's not 100% clear.

I do not know the auction results from yesterday - let me know ...

Update:
Control was transferred to Otera at least at a 1/4 discount to Macklowe's purchase price, but likely more...