Blackstone Defaults on Nordic CMBS Due to Fluctuating Real Estate Values

(Bloomberg) — Blackstone Inc. defaulted on a €531m ($562m) bond backed by a portfolio of Finnish offices and stores as rising interest rates hit real estate values ​​in Europe.

Most read by Bloomberg

Blackstone, which acquired landlord Sponda Oy in 2018, required holders of securitized bonds to defer asset disposal and debt repayment, according to people familiar with the plan. The bondholders voted against a further extension, people said, asking not to be named because the sale process was not public.

Property values ​​in Europe are falling as rising interest rates scare off buyers until there is a clearer picture of how much they will rise. This has led to a large gap between bids and offers, reduced transaction volumes and put pressure on holders of loans that are maturing. About a third of all commercial mortgage-backed securities loans maturing in 2023 and 2024 face high refinancing risks, according to a study published by Scope Ratings in January.

Concerns about how much the value could fall are prompting lenders to push for sales faster, while borrowers would rather take longer to find better deals on their properties. Falling prices have so far not resulted in massive credit losses, so some lenders are betting that quick sales can still secure full repayments.

“This debt relates to a small portion of Sponda’s portfolio,” a spokesperson for Blackstone said in an emailed statement. “We are disappointed that the servicer did not put forward our proposal, which reflects our best efforts and which we believe will provide the best possible outcome for banknote holders. We remain fully confident in Sponda’s core portfolio and its management team, whose priority remains to provide high quality retail and office assets.”

Scandinavian property has been at the forefront of Europe’s property market correction after a long period of relative calm following the global financial crisis. Investors were spooked by landlords’ use of relatively short-term debt, which made them more vulnerable to higher rates. The level of cross-ownership in the sector, where multiple real estate companies own stakes in each other, also exacerbated concerns.

In the US, where the decline in valuation has been more severe and rates have been higher for a long time, owners such as Columbia Property Trust Pacific Investment Management Co. and Brookfield Corp. also defaulted on mortgages. The U.S. office market has been particularly hard hit by the pandemic-induced transition to working from home.

Read more: Pimco, Brookfield Office default signals worsening real estate troubles

The Blackstone notes have already been redeemed and outstanding, prompting the Mount Street Credit Service to determine default, according to Thursday’s announcement. Now the loan will be transferred to a special servicer, he added.

Blackstone acquired Sponda for almost €1.8 billion in 2018.

Fitch downgraded the bonds in December, saying that “weak macroeconomic prospects and limited lending appetite for illiquid secondary assets” pose serious refinancing challenges.

The loan was provided by Citigroup Inc. and Morgan Stanley and is secured by 45 properties in Finland, most of which are offices. At the time of the downgrade, the senior loan of €297.1 million remained outstanding at the time of the downgrade, according to Fitch.

The portfolio is about 45% vacant, according to the report, and has risen by about 10 percentage points during the pandemic. Travel restrictions then hampered Blackstone’s sales efforts before the war in Ukraine sparked another wave of volatility.

–With the assistance of Alastair Marsh.

Most read by Bloomberg Businessweek

© 2023 Bloomberg LP

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button