patrick.net

Dude, you need to give Blackstone a run for their $$. You'll be set for life. And your kids and you kids kids kids.

But seriously, I don't get it. How can a company like Blackstone, that is filled with geniuses, lose $$ like this?

It's real estate. They can write off the losses and get out of a shitty market by dumping it if they had a phenomenal year on other property. Investors don't want to sell at a loss, but in a lot of cases it makes sense if other opportunities are on the table and they need/want capital for a better location/property.

Anyone that actually invests in real estate over say 20-30 year will 100% lose some money along the way. It just wipes out your taxable income and you still have access to other properties with equity and can pay yourself whatever you want. As weird as it sounds losing money in RE can be a good thing if you're having a gangbuster year and you've been looking to offload a dog property.

In the immortal words of Bruce Lee in Enter the Dragon: "No Tanks".

Interesting, losing 163 million gives you more capital. What's even more interesting is how the smartest guys in the room made such a bad investment. I get it, not everything is a winner and CRE was effected Bigly over the last few years but, wow, that's a lot of cheese.

GNL says

in San Francisco

@GNL The problem in this particular case is that the building is in San Francisco.

I wouldn't make any bets on SF while it remains 110% Democrat. They seem determined to actively drive away all their biggest businesses, so those office buildings may not fill up again anytime soon.

CCCP_trollbot says

For our hero’s here that hope / pray for the foreclosure tsunami…..a quick reality check:

I guess you didn't realize this post is about CRE huh?

Patrick says

I wouldn't make any bets on SF while it remains 110% Democrat. They seem determined to actively drive away all their biggest businesses, so those office buildings may not fill up again anytime soon.

That was my exact point. Unloading a non-performing asset in a declining area, where they now can invest in a better area and write off that loss against other performing assets. Business and RE 101. I would not be invested in cities like SF, Chicago, NYC (most of it), Baltimore, etc. Covid changed the whole WFH dynamic and CRE will take a beating as leases are generally 5 years, so companies are going to realize having a big office building is a waste of money, especially in shit hole cities.

That said I don't see it being an epic crash. A lot of buildings can be repurposed for other uses. People and businesses have gotten a lot more creative with that. Or they just tear them down. The other thing is selling at a loss does NOT mean you lost money on it over those years. Who knows what kind of lease they had on a $200M+ building. They could have been making a ton and now get to wipe out $160M in earnings and still made money. It's accounting and lawyering. When you're the size of Blackstone you have the ability to make taxes and income disappear. Likely the strategy before the building went to $20M.

Patrick says

I wouldn't make any bets on SF while it remains 110% Democrat. They seem determined to actively drive away all their biggest businesses, so those office buildings may not fill up again anytime soon.

Seems intentional and malicious.

Drive down real estate prices by intentionally creating anarcho tyranny conditions.

Then buy at fire sale prices and create conditions like enforcing laws to help increase the value of real estate.

ad says

Patrick says

I wouldn't make any bets on SF while it remains 110% Democrat. They seem determined to actively drive away all their biggest businesses, so those office buildings may not fill up again anytime soon.

Seems intentional and malicious.

Drive down real estate prices by intentionally creating anarcho tyranny conditions.

Then buy at fire sale prices and create conditions like enforcing laws to help increase the value of real estate.

In a Dr. Evil world, which it sure seems like we are in, this makes perfect sense. We'll see. In our new capitalist economy it seems possible. If most of covid was all about the money, can it really be doubted?

SF will rebuild, tech there is huge. if it’s cheap, it’s opportunity.