While The Observer was off writing our cover story on Blackstone real estate wizard Jonathan Gray, he was plenty busy himself, working out a deal to buy a bunch of Merrill’s old commercial real estate, which are now controlled by Bank of America.
The exact details of the deal have not been revealed, but the price is reportedly $1 billion. Bank of America is desperate to sell its “non-core” assets to shore up its business, according to DealBook. The commercial portfolio now falls into this realm, even if it was once a big part of Merrill, and so many other Wall Street bank’s, businesses. As we reported, that has been a key to Blackstone’s recent success, that it has few rivals at scale right now.
At $1 billion, this is actually one of the smaller deals Blackstone has undertaken during the downturn. The firm has spent almost $10 billion on real estate since 2009, according to president Tony James, and it still has $7.4 billion on hand for more real estate deals. The tally so far:
Blackstone spent more than $2 billion on a handful of industrial portfolios in the past year, with roughly 45 million square feet at 275 facilities. There was $9.4 billion for 560 U.S. strip malls owned by Australian operator Centro. It took a stake in bankrupt mall behemoth General Growth Properties, which is controlled by Bill Ackman, the hedge fund manager who happens to be a close friend of Mr. Gray’s (they met at their daughters’ preschool). Blackstone took its stake after Mr. Ackman beat out the firm’s own bid with rival mall operator Simon Properties.
And in a sign of just how much better Blackstone has made it through the crash, Mr. Gray oversaw the purchase last October of the bankrupt Extended Stay hotel chain for $3.9 billion. He knew the business well, having bought it for $3.4 billion in 2004, before selling it three years later for $8 billion, one of countless boom-time deals that cratered. Mr. Gray was there to pick up the pieces.
It’s a good time to be the king.