Wall Street’s largest commercial real estate landlord, private equity firm Blackstone, has defaulted on a €531 million ($562 million) bond backed by a portfolio of offices and stores owned by Sponda Oy, a Finnish landlord it acquired in 2018.
While Blackstone had sought an extension from holders of the securitized notes to allow time to dispose of assets and repay the debt, the surge in market volatility triggered by the war in Ukraine and rising interest rates interrupted the sales process, and bondholders voted against a further extension.
Since the security has now matured and has not been repaid, loan servicer Mount Street has determined that an event of default has occurred, according to a statement Thursday. The loan will now be transferred to a special servicer.
“This debt relates to a small portion of the Sponda portfolio,” a Blackstone representative said in an emailed statement. “We are disappointed that the servicer has not advanced our proposal, which reflects our best efforts and we believe would deliver the best outcome for note holders. We continue to have full confidence in the core Sponda portfolio and its management team, whose priority remains delivering high-quality retail and office assets.”
Blackstone is understandably trying to minimize the news, yet the firm clearly continues to scramble to stabilize the bleeding in its massive real estate portfolio. On Wednesday it said that it had blocked investors from cashing out their investments at its $71 billion real estate income trust (BREIT), as the private equity firm continues to grapple with a flurry of redemption requests.
BREIT said it fulfilled redemption requests of $1.4 billion in February, which represents only 35% of the approximately $3.9 billion in total withdrawal requests for the month, the firm said in a letter to investors as Reuters first reported.