With the recent closing of its most recent debt strategies fund, Blackstone Real Estate Debt Strategies (“BREDS”) commitments now total $3.5 billion. Blackstone’s Senior Managing Director and Chief Investment Officer of BREDS, Mike Nash, discusses the success of Blackstone’s real estate debt business and its impact on the commercial real estate industry.
Q. Why are there so few sources of capital for real estate investors?
There remains unprecedented turmoil in commercial real estate markets as they begin their recovery. Major property owners encountered substantial liquidity needs during the market downturn and we continue to see tremendous unmet demand for real estate debt. Looming on the horizon is $2.5 trillion of real estate debt maturing over the next 7 years, much of which will need to be recapitalized over the next 2-3 years. Additionally, new CMBS issuance still remains a fraction of pre-crisis levels. Exacerbating the problem is the fact that many historic real estate lenders have exited the market and are not nearly as active as they once were.
With $2 billion invested and several billion more available to invest, Blackstone is uniquely positioned to meet this demand for debt capital.
Q. Why has BREDS been so successful in raising capital?
Investors clearly understand that this is an opportune time for debt investing, particularly when partnering with a firm such as Blackstone that has a proven track record, an experienced team and the resources to be a major player.
This is largely a relationship-driven business, and we have earned investors’ trust through consistent performance, high levels of transparency, and the accountability that comes with putting our own capital and reputations on the line every day.
Q. How does your business distinguish itself from Blackstone’s traditional real estate business?
Blackstone is a world leader in opportunistic private equity real estate investment, our traditional real estate business. For twenty years we have looked for under-managed real estate assets where we can apply our operational expertise and investor’s capital to help improve the overall strength, cash flow, and value of the assets over time. As a result, our traditional real estate business is focused on control-oriented equity ownership of real estate. In contrast, our real estate debt business, BREDS, is focused on providing real estate owners much needed mezzanine debt capital and other structured debt solutions in order to assist these owners in the recapitalization of legacy assets or to facilitate new real estate investment.