A Few Loans Go To Special Servicing, but the Sky Is Not Falling at Blackstone

Nothing turns heads in the commercial real estate industry like news of a property placed into special servicing. For this reason, tongues have been wagging about a few looming foreclosures of properties owned by Blackstone, the largest owner of commercial real estate in the world. When a special servicer gets involved, it can be an indicator of an impending downward spiral, but for Blackstone, the recent transfer of three commercial mortgage-backed securities loans totaling roughly $900 million into special servicing is part of their strategy.

Blackstone isn’t struggling for cash. During the company’s fourth-quarter and full-year 2022 investor call on January 26, 2023, executives noted more than once that the asset management giant has roughly $187 billion of dry powder for opportunistic investments. So, with such ample capital on hand, why not continue to pay the loans on the multifamily portfolio and two office properties in question? There’s a method to the company’s madness, which, as it turns out, is not madness at all.

In January, a loan with a balance of approximately $270.3 million secured by an 11-property Blackstone multifamily portfolio totaling 637 apartment units in Manhattan was transferred to a special servicer. A 2015 acquisition of Blackstone’s Blackstone Real Estate Partners VIII and Fairstead Capital, the group of Class A and B+ properties, which includes the 200-unit apartment building at 250 W. 19th St., has an average occupancy level of 93 percent. However, as Moody’s Investors Service notes in a March 21 rating action, due to the pandemic (and likely

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