Blackstone Group LP might ask creditors to restructure $4.94 billion of debt remaining from its 2007 purchase of Sam Zell’s Equity Office Properties Trust, according to people familiar with the discussions.
Blackstone would consider paying down about 5 percent of the balance and agreeing to a slightly higher interest rate in exchange for extending the maturity, according to two people who declined to be identified because the talks are private. The debt, which was packaged and sold as a commercial mortgage-backed bond in June 2007, matures in 2012, according to data compiled by Bloomberg.
While U.S. commercial-property values have fallen almost 42 percent since 2007, the Blackstone properties are generating enough cash to pay the mortgages, according to the data. The private-equity firm, led by chairman and chief executive Stephen Schwarzman, acquired the real estate in 2007 in a $39 billion leveraged buyout, the biggest to date at that time, and started selling buildings to other investors.
“By today’s standards, they overpaid,” said Tom Craig of the commercial-property brokerage TSC Real Estate in Seattle. “Even though Blackstone was able to dispose of a good number of those assets, there are still some they didn’t sell.”
Blackstone, the world’s biggest private-equity company, on Thursday reported a first- quarter profit of $360.4 million as the value of its private-equity investments rose and dealmaking accelerated.
