Tuesday, June 05, 2012

Blast From The Past

One of my first jobs out of college was reviewing real estate deals that had imploded at the end of the 1980s and in the early 1990s.  One of the biggest real estate syndicators in the '80s was Chicago-based JMB, and one of its principals was Neil Bluhm.  Mr. Bluhm is now managing principal of Walton Street Capital, LLC, a Chicago-based private equity firm.  I saw this Bloomberg article over the weekend where Walton Street is about to lose a large portfolio of properties.  From the Bloomberg article:
Walton Street, whose managing principal is billionaire Neil Bluhm, bought the properties for $2.9 billion at the peak of the real estate market in 2007, Crain’s reported today. About $2.5 billion of loans on the Chicago-based firm’s portfolio come due June 8, and the properties are worth so much less than the debt that it makes sense to walk away, the newspaper said.

Blackstone Group LP (BX), the world’s largest private-equity firm, has acquired almost $600 million of debt on the buildings, putting it in a position to take control if the borrower defaults.
Here is another Bloomberg article on the transaction, as it looks like Blackstone is going to get the portfolio.

I like this quote that ends the first Bloomberg article:
The (Walton Street property) surrender comes just Walton Street is trying to raise $2 billion for its seventh and largest fund, Crain’s reported.  
It's a Wizard of Oz approach to raising capital, "Pay no attention to all the lost properties behind the curtain."   Mr. Bluhm didn't become a billionaire for lack of chutzpah.

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